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Role Reversal

Value & Volatility have traded places to start 2023


In our Factor Recap post last week, we noted the disparity between Value and Volatility returns over the course of 2022. The beginning of 2023 has so far been similar in the inverse correlation between the two factors, although their directions have reversed.


After a strong positive year for Value, it is down -5.3% in our large cap universe, as of Jan 13th. On the other hand, Volatility rebounded (so far) from a large negative year in 2022 to begin 2023 up +12.6% (large cap universe). Both factors’ YTD returns were driven by last week’s moves.


The following chart shows how last week's returns compare to each's weekly history. All five factors are shown with last week's return indicated by the red dot. Value and Volatility are on the bottom row. The first graphic is for our large cap universe. The second is for small cap, which is a similar situation.


All charts were created by Jackson Creek Investment Advisors with data sourced from S&P Global.


Large Cap Universe - Weekly Factor Distributions
Histogram charts of Momentum, Capitalization, Short-term momentum, Value, and Volatility factors for Jackson Creek Large Cap Universe weekly factor returns

Small Cap Universe - Weekly Factor Distributions


The chart below compares the first two weeks of each year for our five key factors in both our large and small cap universes.


Large Cap Universe - First Two-weeks of Year Factor Returns (2000-2023)

Small Cap Universe - First Two-weeks of Year Factor Returns (2000-2023)

In the large cap universe, Volatility's start to this year is the highest in our data history, going back to 2000, narrowly beating out the years 2001 and 2009. Value's negative start is more than two times as negative as the second-worst year (2000).


The story is similar in our small cap space, although Volatility's 2023 start is second to 2001. Value (-4.95% YTD) is just worse than the first two weeks of 2001 (-4.77%).


We will be the first to tell you that two weeks does not make a trend, especially when you have a long-term horizon. However, whenever there are periods with noticeable extreme events, we like to look at it from a historical perspective and add context.

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