2016 Shows That Factors Are Fickle (Part 1)

Factors are Cyclical

Ben Johnson 19.01.2017
Facebook Twitter LinkedIn

In the past year, I’ve explored a variety of topics related to strategic-beta exchange-traded products, factors, “smart” beta—whatever you’d like to call it. My goal in doing so has been to educate all of you. I hope that the information and insights I’ve shared will help you to make better decisions when it comes to using this ilk of funds in your portfolios, or has otherwise led you to conclude that they simply are not your cup of tea.

In this article, I am going to revisit the topic of factors’ cyclicality. The year was marked by some dramatic changes in factor leadership. Value made a comeback, while growth lagged. Small-cap stocks had been steadily gaining ground on large caps through much of the year and spiked higher in the weeks following the U.S. election. Low-volatility stocks, which had been outperforming the market at large as well as more-volatile names, are now getting left in high-beta stocks’ dust.

To be clear, this sort of reshuffling is a regular feature of not just factors, but sectors, asset classes—you name it. The lessons to be learned from these perpetual games of leapfrog are essential. Implementing those lessons is hard.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Member.

Register For Free
Facebook Twitter LinkedIn

About Author

Ben Johnson  Ben Johnson, CFA is the Director of Passive Fund Research with Morningstar.

© Copyright 2021 Morningstar Asia Ltd. All rights reserved.

Terms of Use        Privacy Policy