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A look at what factors influenced the market last week
Equities were positive during the holiday shortened week. Large caps outperformed small caps as the Russell 1000 rose 0.60% and the Russell 2000 gained 0.11%.
All factor returns were within normal ranges. Small cap factor spreads dominated their large cap counterparts.
Both measures of momentum had strong returns, albeit in opposing directions. Medium-term momentum (MTM) experienced a reversal. Stocks that had outperformed the most during the previous six months underperformed last week. Short-term momentum (STM) was positive. Stocks that had outperformed the most during the previous four weeks continued their outperformance last week.
Value and Volatility had diverging returns within each index, but their spreads were directionally opposite across the indices. Value was negative (-0.66%) in the small cap universe and positive among large caps (0.41%). Volatility was positive (+1.27%) in the Russell 2000 and mildly negative among large caps. Value and Volatility tend to have opposing returns due to their inverse relationship.
Size was negative in each universe.
In this series, we highlight several factors’ returns along with the broad index. These are factors – or stock characteristics – we monitor closely. Factor returns equal the difference in the average return of the highest ranked 10% (decile 1) of stocks minus the lowest ranked 10% (decile 10) within each metric. Returns are based on stocks that pass our screen for liquidity, price, and analyst coverage; therefore, some index constitutes are excluded (except for index return). Ranks are sector neutral and equal weight. Stocks are ranked one week before the return period date, with returns calculated for the following week.
Read factor explanations here.