The trend continues for the laggards
JAMIE VICECONTE
CHIEF MARKETING OFFICER
CO-CHIEF INVESTING OFFICER | FOLIOBEYOND
2 min read
We asked the question last month if this is the start of a trend, so maybe it finally is. There have been a number of prominent Value investors who have officially thrown in the towel, so maybe that was the contrarian sign we needed. For the month, our Factor-based portfolios in Equities outperformed the broad MSCI All Country World Index (“ACWI”) by roughly 0.5% and have only lagged by roughly 1% since the middle of the year. So the COVID effect – and potential regime change around that – concentrated the bulk of our underperformance in the second quarter after the March route.
At a more micro level, Value and Small Cap ETFs outperformed their Growth and Large Cap counterparts by anywhere from just over 4% to almost 8% last month. This may sound extreme, but we noted in prior months that Value had underperformed Growth by more than 30% in some measures year-to-date.
As we write this, the large cap growth names had another significant move higher on expectations that the work from home (”WFH”) names will benefit from a Biden Administration. But there are others forecasting that further stimulus should help Small Cap and Value names as well.
As we typically note, we can’t predict the short to intermediate term moves in these discrete market sectors. Last month’s moves do show us that valuation disparities can snap back strongly and patience with positioning is critical.
The Fixed Income portion of client accounts was down about 0.6% on the month with longer duration sectors of the market declining in price on the expectations of a reflation trade with a “Blue Wave”. That should ease as the reality of a divided government in the US and a continued resurgence of COVID cases continues.
