In late August, investors started shifting money from so-called momentum stocks to those associated with value. As central banks around the world started cutting interest rates to stimulate economic growth, it seemed to become more profitable to hunt for stocks that are undervalued, rather than sticking with the ones that already have a solid following.
At least, that was the thinking in early September, but a new report on trading activity throughout the entire month shows that theory may have been premature.
It’s “too early to call Value rotation a regime change,” according to data from FTSE Russell. The “Great Rotation” sputtered out by the end of the month, wrote analysts at the London-based exchange. Instead, by the end of the month, factors including Quality, Low Volatility, and Profitability won out globally.
As a reminder, factor investing involves targeting characteristics of stocks that have been quantitatively shown to outperform the broad market.
The FTSE Russell data shows a slightly different picture in the U.S., than in other parts of the world though.
Value and Size-oriented stocks “surged,” according to the report, and Quality and Profitability lost favor, “though this risk rotation had lost steam by month-end.” For the year to date through September, Low Volatility and Profitability are still on top.
The report also offers some of the top stocks in several of the factor categories mentioned above.