Weekly Factor Blog

A look at what factors influenced the market last week

The small cap Russell 2000 led equities higher last week with a gain of 1.07%. This was the fifth consecutive week of small caps outperforming the large and mid cap indices.

Short-term momentum (STM) and Value were the two key factors with directionally similar spreads across the capitalization spectrum.

Short-term momentum was the strongest factor in each index with each spread about +2.3%. Stocks that outperformed the most over the previous four weeks continued to outperform last week. The large and small STM spreads were just at one standard deviation above average.

Value declined. Stocks with the most attractive valuations underperformed those with the least attractive valuations. Value declined the most in the small cap universe.

Higher Volatility was a positive influence among large and mid caps, while lower Volatility worked among small caps. The most volatile stocks outperformed the least volatile in the Russell 1000 and Russell MidCap indices. The small cap Volatility spread was -0.66%.

Smaller companies outperformed larger stocks in the large and mid cap indices. The largest ten percent of companies underperformed the smallest ten percent by over 1.0% in the Russell 1000 and Russell MidCap indices. Larger companies tended to outperform in the small cap index.

Medium-term momentum (MTM) was mixed and less influential. MTM was positive in the large and mid cap spaces and negative among small caps.

In this series, we highlight several factors’ returns along with the broad index. These are factors – or stock characteristics – we monitor closely. Factor returns equal the difference in the average return of the highest ranked 10% (decile 1) of stocks minus the lowest ranked 10% (decile 10) within each metric. Returns are based on stocks that pass our screen for liquidity, price, and analyst coverage; therefore, some index constitutes are excluded (except for index return). Ranks are sector neutral and equal weight. Stocks are ranked one week before the return period date, with returns calculated for the following week.

Read factor explanations here.

The Russell 1000 Index is a U.S. stock market index that tracks the highest-ranking 1,000 stocks in the Russell 3000 Index, which represent about 93% of the total market capitalization of that index. 

The Russell Midcap Index is a stock market index that measures performance of the 800 smallest companies in the Russell 1000 Index. 

The Russell 2500 Index measures the performance of the 2,500 smallest companies in the Russell 3000 Index, with a weighted average market capitalization of approximately $4.3 billion, median capitalization of $1.2 billion and market capitalization of the largest company of $18.7 billion.

The Russell 2000 Index is a small-cap U.S. stock market index that makes up the smallest 2,000 stocks in the Russell Index. It was started by the Frank Russell Company in 1984. The index is maintained by FTSE Russell, a subsidiary of the London Stock Exchange Group. 

Index performance is presented as a benchmark for reference only and does not imply any portfolio will achieve similar returns, volatility or any characteristics similar to any actual portfolio.  The composition of a benchmark index may not reflect the manner in which any is constructed in relation to expected or achieved returns, investment holdings, sectors, correlations, concentrations or tracking error targets, all of which are subject to change over time. You cannot invest directly in an index. Index performance does not reflect the deduction of any investment management fees, transaction costs, or expenses, and the performance of any investment product may differ from the index.