Weekly Factor Returns

A look at what factors influenced the market last week

Equities were positive last week, led by the small cap Russell 2000, which increased 3.93%. The Russell MidCap index gained 2.38% and the large cap Russell 1000 rose 0.75%.

Three of the five key factors were directionally congruent across each capitalization range. Several factors’ returns exceeded normal expectations.

Medium-term momentum (MTM) contributed positively to broad equity index performance. Stocks that had outperformed the most over the preceding six months continued to outperform last week. MTM was strongest in the small cap universe. The small cap MTM spread was +3.01%, which was one standard deviation above its weekly average.

Short-term momentum (STM) reversed last week. Stocks that had outperformed the most over the previous four weeks tended to underperform last week. STM declined the most in the Russell MidCap (-1.43%).

Valuation was a positive contributor. Stocks with the most attractive valuations outperformed those with the least attractive valuations, on average. The small cap Value spread was +2.59%, while the mid cap Value spread was +2.20%. Each return was greater than one standard deviation above average.

Size experienced mixed return profiles. The largest companies underperformed the smallest within the large and mid cap universes. The difference between the average return of the largest ten percent of companies and the smallest ten percent was -2.49% in the Russell 1000. The large cap Size spread was greater than one standard deviation below its average. Larger companies tended to outperform in the small cap index.

Volatility’s influence was positive in the large and mid cap indices and negative in the small cap space. The most volatile stocks outperformed the least volatile in the large and mid cap indices. Higher Volatility stocks underperformed in the Russell 2000.

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.