Style Research provides in-depth analysis covering key equity factors on monthly and quarterly bases. On January 5, 2018, Style Research presented the Q4 2017 Factor Performance analysis via a live webinar attended by hundreds of investment professionals.
The article below recaps the live presentation by Style Research’s Bernie Nelson, President, North America, and Tom Idzal, Managing Director. Detailed reports and the webinar recording are also available.
In developed markets and the US, growth delivered strong returns in 2017, but forecasted growth factors were among the strongest performing factors. In addition, high quality, high beta, and high momentum stocks continued to benefit from the prolonged bull run in equity markets. Value saw a small revival in Q4, more in cash flow yield than traditional value factors, but over the entirety of 2017 value couldn’t regain the improved returns that we saw in 2016.
In Europe (including the UK), factor signals were quite muted in Q4, but stocks oriented toward value via the high EBITDA to enterprise value factor and with strong earnings momentum were heavily favored.
In emerging markets, the highest performing factors look significantly different from last year’s strength in value. Overall, in 2017 there was strong outperformance from high dividend growth and high forecast growth, culminating in a strong year for factors within growth, beta, and momentum. That said, there was also some strength in key value factors. Nelson said, “Investors in emerging markets equities often demand some kind of valuation underpinning alongside growth, beta and momentum factors”.
As part of the webinar, a flash poll was conducted to determine audience sentiment about which factor categories are primed to outperform in global developed markets in 2018. Participants were bullish on value (33%), growth (28%) and quality (24%), but agnostic on volatility and yield, neither of which broke double digits. After a weak 2017 for value factors, it seems that a third of the audience believes that value factors may turnaround in 2018. Over a quarter still favor an ongoing growth story.
Nelson did caution, however, that “to get the full picture, you need to go beyond the idea that value, growth and momentum are the basic building blocks, and also explore which specific factors are being used to define these style categories.”
GET THE FULL PICTURE
Get the complete analysis of which specific factors contributed to results in the Style Research Q4 2017 Factor Performance Study. Click here to access the full recording of the webinar and request various regional reports.