Low beta and Value were the best performing factors with momentum lagging. The "Pure" quality factor also outperformed reflecting increased risk aversion. The 16% outperformance of the Value style relative to Growth was a notable feature of the first half of the year.
A rotation to Low Beta and Value
The first half of 2022 produced large rotation in factors utilizing the FT Wilshire "Pure" factor methodology and data. In terms of relative performance, the Low Beta and Value Factors outperformed the most (responding to rising real yields) with the momentum factor underperforming significantly.
The Pure quality factor also outperformed
Interestingly the "Pure" Quality factor outperformed as well (unlike most other Quality Factor indices) - this reflects the Pure Factor methodology stripping away unintended sector and factor exposures. The outperformance of the quality factor reflected the desire to seek protection against recessionary headwinds.
Chart 1: Pure factor relative performance YTD
Source: Wilshire
Mapping the progression of Pure Factor relative performance YTD
Value has persistently outperformed while quality outperformed strongly in Q2. By contrast Momentum declined significantly in Q2 .
Chart 2: Relative return of Pure Factors YTD
Source: Wilshire
Value outperformance the key feature of the FT Wilshire 500 Size and Style Index returns
In terms of the size indices large and small delivered similar returns YTD with Micro cap slightly underperforming. The scale of the Value style outperformance was the key feature in the first half of 2022.
Chart 3: FT Wilshire 5000 size and style returns
Source: Wilshire
A notable feature of 2022 market dynamics has been the 16% outperformance of Value relative to Growth. The Growth /Value relative return ratio appears to be returning to pre-Covid levels
Chart 4: Growth Style Index returns relative to Value
Source: Wilshire
Index 15303321 E0922
