Following months of no change at the top of the factor rankings, the Value factor has finally replaced High Beta in the top slot. High Beta has not fallen out of favor, though, as it currently sits in the #2 spot.
Sectors: The sector categories are showing a high degree of dispersion, with 50 points separating top-ranked Financials from bottom-ranked Energy. The increased spread was the result of most sectors posting momentum increases. The one sector showing a decline in momentum was Energy, and its fall pushed it back into negative territory. Financials and Technology continue to provide the leadership, and there were only minor changes in the relative-strength lineup this week. Industrials and Materials swapped places, as did Health Care and Consumer Discretionary. Although the defensive sectors have been lagging the broader market, they are certainly participating in the market rally and posted increases to their momentum scores this week.
Factors: It finally happened. After months of being at the helm, High Beta relinquished its #1 ranking to Value. While High Beta and Value may seem to have nearly opposite attributes, both have been performing well in this market environment. Likewise, Market Cap and Small Size may seem to be diametrically opposed, yet both proved to be above-average factors for most of the past four months. Quality moved ahead of Fundamental, producing the only other change in this week’s relative-strength lineup. The lower-ranked factors added more momentum than the higher-ranked ones, resulting in a tightening of the spread, with just 17 momentum points separating the 11 factors.
Global: Latin America is a volatile investment category, and both its upside and downside moves tend to be exaggerated. Currently, Latin America is on an upswing, and it padded its margin over second-place China again this past week. With Emerging Markets in third place, the market is certainly showing a preference for developing markets at the expense of developed markets. Pacific ex-Japan held on to its fourth-place ranking, while the U.S. moved ahead of Canada to grab fifth. In the lower half, EAFE moved ahead of the U.K, and the Eurozone climbed a notch higher to put Japan on the bottom.
Disclosure: Author has no positions in any of the securities mentioned and no positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) is received from, or on behalf of, any of the companies or ETF sponsors mentioned.