Lazard Global Factor Report

The global equity markets ended July with a small gain largely resulting from strength in the United States. European markets broadly sold off as did Asian markets with the exception of Japan and Australia. Returns in local currencies were stronger, but US dollar strength erased those gains, most notably in the United Kingdom.

The dominant themes of the past few months remained in place as optimism over an interest rate cut by the Federal Reserve (realized on 31 July) and progress on the China-US trade war overcame weaker economic news in Europe and Asia. The election of Boris Johnson significantly increased the prospect of a hard Brexit, deflating hope in the manufacturing sector and sending sterling to new lows. Emerging markets underperformed again as the weakening global outlook pressured Asian markets. The outlook also impacted oil prices, which declined further from April. Interest rates also fell modestly in the month. US consumer demand stayed healthy, countering the flagging business outlook. Through the beginning of the quarterly reporting period, earnings have shown a modest decline with weaker guidance driven by the macro uncertainty. Technology stocks led the market in the month. Health care stocks rebounded in July but remain one of the weakest sectors for the year. Otherwise, more defensive names performed well, with consumer staples, utilities, and communication services posting positive returns in the month.

Factor performance reflected investor defensiveness with low risk and higher financial quality companies outperforming. Value measures, especially cyclical ratios (P/B), were weak throughout the developed markets but outperformed in emerging markets. Companies viewed as defensive (low P/E) outperformed, particularly in the United States and Japan. Price momentum enjoyed one of its stronger months, working well around the world. By contrast, stocks with analysts’ upgrades underperformed. Growth measures fared well in Europe but were mixed in the United States and emerging markets.

The preceding is an excerpt from our monthly Factor Report. Read the full paper.


This document reflects the views of Lazard Asset Management LLC or its affiliates (“Lazard”) based upon information believed to be reliable as of the publication date. There is no guarantee that any forecast or opinion will be realized. This document is provided by Lazard Asset Management LLC or its affiliates (“Lazard”) for informational purposes only. Nothing herein constitutes investment advice or a recommendation relating to any security, commodity, derivative, investment management service or investment product. Investments in securities, derivatives and commodities involve risk, will fluctuate in price, and may result in losses. Certain assets held in Lazard’s investment portfolios, in particular alternative investment portfolios, can involve high degrees of risk and volatility when compared to other assets. Similarly, certain assets held in Lazard’s investment portfolios may trade in less liquid or efficient markets, which can affect investment performance. Past performance does not guarantee future results. The views expressed herein are subject to change, and may differ from the views of other Lazard investment professionals.

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