Equity factor investing matters in both stock market crashes and when positioning for a portfolio recovery as specific factors have a strong tendency to either outperform or underperform the market in each of those regimes.
To gain insights into what the future may hold we examined three historical crashes and their recoveries.
The 1987 crash lasted only three months, and the global financial crisis lasted 16 months.
Both were similar because their recoveries were mirror-images of their crashes: factors that did poorly in the downturn posted the best performance in the recovery.
The tech bubble focused on one industry and heavily hit the US and some other developed markets and had a jumble of factor performances with no discernable pattern.