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A look at what factors influenced the market last week
Equity markets were mixed last week as investors digested the latest inflation data. Small cap stocks, measured by the Russell 2000 index, gained 1.17% despite a midweek drawdown. Large cap stocks declined by 0.26%.
Factor spreads were directionally mixed or had large differences in magnitude between the two major indices. Both measures of Momentum were negative in the small cap universe and positive among large caps.
The smallest and least attractively valued stocks in the Russell 2000 had a strong positive influence on the overall index. The largest ten percent of stocks, measured by market capitalization, underperformed the smallest ten percent by 2.24% in the small cap universe. The most attractively valued companies underperformed the least attractively valued by 2.27%. Both negative spreads were over one standard deviation below their respective weekly averages.
Size and Value were negative in the large cap Russell 1000, but to a lesser degree compared to the Russell 2000.
Volatility was positive in each index.
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.