Growth And Momentum Factors Still Leading U.S. Stocks Performance YTD
James Picerno | Oct 05, 2018 07:18AM ET
Yesterday’s sharp selloff in US stocks delivered haircuts far and wide, but the setback left growth and momentum factors in the lead for year-to-date equity performance, based on a set of exchange-traded funds (ETFs). While large-cap value suffered the smallest loss in yesterday’s rout among the major equity factor buckets, this slice of US equities remains in last place in 2018 through yesterday’s close (Oct. 4).
Three factor ETFs are essentially tied for first place in the year-to-date horse race, representing small-cap growth, large-cap growth, and a fund targeting momentum. At the top of the list is iShares S&P Small-Cap 600 Growth (IJT), posting a 15.2% return this year, followed by iShares Russell 1000 Growth (IWF) with a 15.1% gain and iShares Edge MSCI USA Momentum (MTUM), which is ahead by 14.9%. This trio is enjoying a relatively strong run vs. the rest of the field.
The weakest factor performer so far this year is large-cap value. The iShares S&P 500 Value (IVE) is up a modest 3.9% in 2018 through yesterday’s close.
For perspective, the broad market is ahead by 9.9% on a year-to-date basis via SPDR S&P 500 (NYSE:SPY).
Despite the latest swoon in prices, the technical profile of the broad market remains upbeat. For example, the SPDR S&P 500 closed yesterday well above its 50- and 200-day moving average and the 50-day average remained far above the 200-day average.
The economic backdrop also remains positive. As reported earlier this week, recent nowcasts point to a healthy 3%-plus increase in US GDP for the upcoming third-quarter report that’s due at the end of this month.
Today’s release of the nonfarm payrolls report for September is expected to support the upbeat outlook for Q3 macro data. Econoday.com’s consensus forecast calls for companies adding 175,000 jobs, which translates into a slightly faster year-over-year gain: 2.0%, the strongest annual rise in over two years, if the forecast is correct.
Get The News You Want
But the strong economy is lifting bond yields, which is suddenly weighing on stocks and so it’s unclear if a healthy economy will continue to support equity prices in the near term.
“A bunch of different data is suggesting we’re in a hot economy right now,” notes Mike Bailey, director of research at FBB Capital Partners. “If there are higher wages, the Fed is likely to raise rates faster. In some ways, it’s worse than a trade war.”
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.