High Dividend Yield And Value Are 2022’s Top U.S. Equity Factors
James Picerno | Aug 04, 2022 07:52AM ET
The stock market is showing some bounce lately, but on a year-to-date basis red ink still dominates. Looking at equities through a factor lens, however, continues to show a wide variety of losses in 2022. Notably, the softest setbacks are (still) in high dividend and value strategies, based on a set of proxy ETFs through yesterday’s close (Aug. 3).
Vanguard High Dividend (VYM) is still leading the field with a relatively light year-to-date loss of 4.0%.
Several flavors of value are only slightly behind VYM. By comparison, a broad measure of the US stock market (SPY) is down a bit more than 12% this year while the biggest loss for our factor set is suffering with a hefty 21.6% loss, based on iShares MSCI USA Momentum Factor ETF (MTUM).
Advocates of value investing are quick to celebrate the relatively light declines for the strategy and point out that growth has take a heavy hit this year. By some accounts, this is evidence that 2022 marks a turning point — the year when the long-suffering value factor returns to form and begins an extended run of outperforming growth.
Maybe, but skeptics continue to ask if macro changes over the past couple of decades have reordered the prospects for value’s historical outperformance. That’s a big discussion and we’ll sidestep it here. On a tactical basis, however, it’s clear that the value mojo has kicked in lately. But as the chart below shows, the factor’s leadership is waning again vs. growth, based on a comparison of two large-cap proxy ETFs. After a strong bounce this year, the relative strength of value vs. growth has reversed course rather sharply. This could be noise, of course. Let’s see if the second half of the year tells us otherwise.
Get The News You Want
Meanwhile, there’s no doubt that factor strategies writ large have posted the weakest run in several years (see chart below). For contrarians, that’s notable since it suggests that the odds for a bounce look encouraging. The main risk to this forecast is that we’re in an extended bear market and so any bounce will be short-lived. Distinguishing between the two scenarios is the critical question. In the current macro climate, however, high-confidence answers for one scenario or the other are elusive, arguably more so than usual.
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.