As the S&P 500 has grown ever more top-heavy, many investors in products tied to the Index have found themselves facing historic levels of concentration risk, the likes of which passive investors have not seen since 1970. The five largest companies have grown to account for nearly 22.0% of the index, potentially leaving investors vulnerable if the companies’ current high valuations fall back to earth. In this session, Invesco will discuss why an equal weight approach to investing in the S&P 500 may provide diversification benefits and reduce concentration risk.
While EM has lagged overall in 2018, some EM factors did outperform.
In the fourth quarter, Dividend Yield was also a strong competitor.
Lowering ‘down capture’ can help ease the impact of dramatic market swings.
Q3 performance shows that different factors outperform in different market environments.
Facebook illustrates how a big company’s big loss can dominate traditional benchmarks.
With fears of a trade war looming over global large-cap stocks, the small-cap factor emerged as the clear winner of the second quarter. Specifically, small-cap low volatility/high dividend was the best-performing factor, followed by the small-cap versions of value, growth, equal weight and momentum.
Small caps have materially outperformed large caps in 2018, with the S&P SmallCap 600 Index outpacing the S&P 500 Index 7.80% to 2.58% between Dec. 29, 2017, and May 25, 2018. Below, I highlight the drivers of small-cap returns this year, and why I believe the trend could continue.
There are many determinants of stock performance. Corporate earnings, fiscal policy and interest rates can all influence the equity markets. But equity returns are also dependent on where we stand in the economic cycle.
Equities experienced heightened volatility during the first quarter of 2018, with the S&P 500 Index surging 7.55% from Dec. 31 2017, through Jan. 26, 2018, before dropping nearly 8% through quarter-end.
Valuations and regulations are among the trends that we’re watching in this industry.