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Growth And Momentum Equity Factors Lead Market Rebound

Summary:
Equity strategies focused on growth and momentum were the top-performing risk factors before the coronavirus crash and nothing’s changed during the market’s rebound from its March 23 low. Although all equity factors have bounced, growth and momentum have bounced higher, based on a set of exchange-traded funds through yesterday’s close (Sep. 17).Leading the charge higher since the crash: iShares S&P Mid-Cap 400 Growth (IJK), which is up a red-hot 56.3% since the Mar. 23 bottom. IJK and three other factor funds are beating the broad stock market since the Mar. 23 trough. In close pursuit to IJK’s rise: large-cap growth (IVW), momentum (MTUM) and small-cap growth (IJT). Otherwise, the rest of the factor field is trailing the overall equity market’s 47.4% rise since the crash reversed,

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Equity strategies focused on growth and momentum were the top-performing risk factors before the coronavirus crash and nothing’s changed during the market’s rebound from its March 23 low. Although all equity factors have bounced, growth and momentum have bounced higher, based on a set of exchange-traded funds through yesterday’s close (Sep. 17).

Leading the charge higher since the crash: iShares S&P Mid-Cap 400 Growth (IJK), which is up a red-hot 56.3% since the Mar. 23 bottom.

Growth And Momentum Equity Factors Lead Market Rebound

IJK and three other factor funds are beating the broad stock market since the Mar. 23 trough. In close pursuit to IJK’s rise: large-cap growth (IVW), momentum (MTUM) and small-cap growth (IJT). Otherwise, the rest of the factor field is trailing the overall equity market’s 47.4% rise since the crash reversed, based on SPDR S&P 500 (SPY), as shown by the red line in the chart below.

Growth And Momentum Equity Factors Lead Market Rebound

Although the rebound has lifted all factor boats, the weakest gainer is well behind IJK’s leading performance. Vanguard High Dividend Yield (VYM), a large-cap portfolio that favors shares with relatively high payouts, is up 32.1% since Mar. 23. That’s hardly a tragedy, but in relative terms it’s a long way from IJK’s surge — more than 24 percentage points behind the leader.

Growth And Momentum Equity Factors Lead Market Rebound

Reviewing all the factor ETFs listed above through a momentum lens continues to show a strong bullish trend on a short-term basis, based on the 10-day vs. 100-day moving averages (red line in chart below). Meanwhile, medium-term momentum (50- vs. 100-day averages) is still playing catch-up, with ten of the 12 funds reflecting an upside bias on this front (blue line). But with overall bullish momentum close to a state of perfection, and market action looking wobbly lately, traders are wondering if the six-month bounce from the coronavirus crash is running out of gas.

Growth And Momentum Equity Factors Lead Market Rebound


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By James Picerno


James Picerno
James Picerno is a financial journalist who has been writing about finance and investment theory for more than twenty years. He writes for trade magazines read by financial professionals and financial advisers. Over the years, he’s written for the Wall Street Journal, Barron’s, Bloomberg Markets, Mutual Funds, Modern Maturity, Investment Advisor, Reuters, and his popular finance blog, The CapitalSpectator.

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