The ETF Portfolio Strategist: 10 Aug 2022
Trend Watch: US Equity Risk Factors
Does the stock market’s rebound of late have support across equity risk factors? Yes, or so it appears, based on my Signal score for a set of factor ETFs (for details on the methodology, see this summary). The majority of these ETFs are now posting Signal scores in the upper range of bullish readings (+3 and higher per the table below).
But there’s one notable exception: large-cap growth stocks (IVW) are running hot again…
while the rally in large-cap value (IVE), by contrast, is considerably weaker.
The value revival, in short, is struggling. This is clearer when we look at the ratio of growth to value (IVW:IVE). In the next chart below, when the trend is rising, growth is outperforming. On that basis, large-cap value’s relative strength has faded this summer.
It doesn’t help that large-cap value’s Signal score is close to the weakest in the factor set noted above — only momentum (MTUM) is lower.
There’s been lots of chatter this year in some circles that the value factor’s finally poised to regain the setbacks suffered relative to growth in recent years. Maybe, but for my money the jury’s still out, especially in the large-cap space. ■