Fears of a prolonged trade war between the U.S. and China continues to weigh on the stock market as some of the listed all-equity factors (i.e. all those not listed as “Passive“) are down over 4.0% month-to-date. However, Low-Volatility equities are still in the black and even outperforming a Passive 70/30 – Conservative portfolio (i.e. 70% bonds and 30% stocks).
Comments on this week’s report:
- High Dividend equities have been surprisingly underperforming Low-Volatility equities over the trailing three-months despite their similar characteristics of having a low degree of volatility and conservative nature.
- Year-to-date Sector Rotation has outperformed all other listed strategies as its high concentration in the technology and industrial sectors (which were among the top performing sectors in that time frame) has driven it higher. However, for that same reason Sector Rotation has underperformed over the trailing 1-year period as its lack of diversification caused it to suffer a larger drawdown in the late 2018 market correction.
- Contrary to Sector Rotation, Low-volatility is vastly outperforming all other listed strategies on a 1-year basis as it benefited from its relatively lower drawdown during the stock market correction at the end of 2018, while still participating in the more recent stock market rally.
- Quality based equities (which are measured on ROE, accrual ratio, and financial leverage) have performed relatively well in all time frames as it remains at the top of the heap, and narrows its gap between the best performing Sector Rotation on a year-to-date basis and surpassed Sector Rotation over the trailing three months.
- Momentum based equities have outperformed over the trailing 3-year and 5-year periods as during those time frames the stock market has primarily experienced upward momentum.