Styles
Style Rotation: Anything But Growth
Driven by massive government stimulus, an imminent vaccine rollout, and the expectation of record earnings in 2021, investors seem to be on the verge of embracing a move away from Large Cap Growth stocks in earnest. The leading candidates offered as broad-based alternatives to Large Growth (LG) include Value, Small Caps, and Emerging Markets.
Research Preview: Rotating Away From Growth
This study examines Value, Small Cap, and Emerging Markets to see if they do, in fact, behave in a correlated manner when viewed as alternatives to Large Growth. The goal is to determine whether this trio of rotational favorites can be considered as broadly-equivalent replacements for LG.
2021 Earnings: How Do We Get There?
According to FactSet estimates, S&P 500 earnings for 2020 are anticipated to come in near $133 per share, a drop of 18% from 2019 results. Given the widespread business disruptions and closures caused by the pandemic, one might have expected this year’s results to be much weaker.
Growth Wherever You Find It
Growth investing is in the midst of a spectacular run this year, extending its decade-long dominance over the Value style. Chart 1 depicts the Growth / Value relationship over the last 25 years through July 31st, with key turning points marked by vertical lines.
Research Preview: Growth, Pure And Simple
Growth investing is in the midst of a record run this year, extending its decade-long dominance over the Value style.
Leadership Rotation And Bear Markets
Bear markets are the financial system’s version of the changing seasons—a cycle we “enjoy” to extremes here in Minnesota.
Factor Failure: Don’t Blame FANMAG
Our recent commentary “1” For The Record Books noted that just one of seven S&P smart beta factors was able to outperform the S&P 500 last year, even though each style basket limits its holdings to constituents of the parent index.
“1” For The Record Books
Dark energy makes up 68% of the universe, yet astrophysicists are having a devil of a time explaining what it is, why it is, or how it works. Quant investors are facing their own dark-energy mystery in understanding style returns of 2019.
Box Jumpers Beware!
Style rotation! Regime change! Market action of the first two weeks of September coaxed the few remaining Small Cap Value managers off ledges from New York to San Francisco.
Portfolio Positioning: Deciding Not To Decide
One portfolio strategy that attracts our interest is a barbell between Growth or Quality on the bullish side, paired with a Low or Minimum Volatility sleeve for the bearish side. This approach deals with today’s uncertainties by essentially “deciding not to decide.”
Styles And Factors DeFANGed
Social media, mobile computing, and digital life-in-the-cloud were the dominant storylines for U.S. stocks over the last five years—reaching the apex of popularity following the early-2016 market low.