Key Takeaways

  • October was a difficult month for factors. Four of the five factors underperformed, with value losing 4.6% in October.
  • The dynamically weighted factor portfolio has continued to outperform the S&P 500, as it has outperformed the broad index by 0.5% year-to-date.
  • For November, the dynamic factor portfolio is overweight momentum while being underweight low-volatility.

October Performance Review

October was a difficult month for factor performance, as four of the five factors underperformed their respective benchmarks (see gray bars in Fig. 1). Over the past month, only momentum turned in a positive return and it was a small contribution of 0.4%. Of the remaining four factors, value was the worst, underperforming its benchmark by 4.6%. The low volatility and size factors also underperformed in October, with low volatility underperforming by 2.3% and small-caps underperforming large-caps by 2.7%.

Fig. 1 – Recent Performance of Factors and Multi-Factor Portfolios

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October continued the struggle for factors, as now only one of the five factors have outperformed over the past 3 months (momentum, see blue bars in Fig. 1) and over the past 12 months (small-caps over large-caps, see orange bars in Fig. 1).

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