Key Takeaways

  • Performance in factors shifted over the past month, as prior laggards (value and low-volatility) did best while past winners (growth) underperformed.
  • Our dynamically weighted factor portfolio saw slight underperformance of 0.3% in December. Since the start of 2020, this strategy has outperformed the S&P 500 by a total of 5.0%.
  • After the latest rebalance, the dynamic factor portfolio is now overweight growth and momentum while being underweight size (small-cap) and value.


Factor Performance Review

Factor performance underwent a significant shift during the past month, as the factors that had done well turned in poor performance, while the laggards enjoyed strong performance. Of the six factors we track (growth, quality, low-volatility, momentum, size and value) value and low-volatility outperformed their benchmarks by the most over the past month (see gray bars in Fig. 1). Value led the way, returning 3.5% over the past four weeks, while low-volatility saw outperformance of 2.4%. Among the laggards, the growth and size factors had the worst performances over the past month, underperforming by 3.1% and 2.1%, respectively.

Over the past year, growth is still the best factor, returning 1.5% relative to its benchmark (see orange bars in Fig. 1)...

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