The median and percentile columns measure the performance of each factor in the Two Sigma Factor Lens relative to the entire history of the factor in USD, using monthly data for the period January 2003 - December 2019.


Notable Performance of Factors in the Two Sigma Factor Lens

  • Several Core and Secondary Macro factors posted strong gains in December.
    • A negotiated phase-one trade deal between the U.S. and China1 buoyed global equity markets, as evidenced by the positive Equity factor performance. It further supported the Emerging Markets factor. In fact, the MSCI Emerging Markets Index (the equity component of the Emerging Markets factor) outperformed the MSCI ACWI Index by over 4% in December.2
    • The positive sentiment also influenced the Credit factor, which was boosted by narrowing high-yield credit spreads in both the U.S. and Europe.3
    • The Foreign Currency factor outperformed its historical average last month, as the U.S. dollar underperformed several G10 currencies, including the British pound, Japanese yen, and euro.4
    • Commodities generated 86th percentile performance, supported by positive performance from oil and precious metals, among others.5
  • Two of the four newly introduced macro styles delivered relatively poor performance in December.
    • While Equity Short Volatility’s underlying CBOE PutWrite Index gained in December, the factor ended the month negative once it was residualized to Equity.
    • Foreign Exchange Carry struggled, as higher-yielding G10 currencies, such as the U.S. dollar, underperformed their lower-yielding counterparts, such as the Japanese yen (as mentioned above). The final factor’s losses were deeper than the raw factor alone would have suggested, once its positive correlation with Equity was accounted for through residualization.

Full-Year 2019 Factor Performance

We want to carve out a special section in this final report of the year to reflect on 2019 factor performance. The table below shows each factor’s return in 2019 as well as its historical annualized return dating back to January 2003. 

2019 was an outstanding year for equities and bonds, with both the global Equity and Interest Rates factors delivering positive and above-average returns. To combat worsening economic conditions and a turbulent trade war between the U.S. and China, central banks supported markets by providing accommodation in the form of further rate cuts and other expansive monetary policy actions.6

The Credit factor, even after it was residualized to Equity and Interest Rates, also posted impressive returns. The factor benefitted from a retracement of a spike in spreads in the last quarter of 2018 (during which Credit suffered -9%) as well as a further narrowing of spreads in late 2019.7

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In terms of the negative performers, the Value factor meaningfully underperformed its long-term average, despite a short-lived comeback for a couple of days in September (see the September Venn Factor Performance Report). All of the components that make up the Value factor suffered this year, but Book to Price led the pack with -11% returns in 2019.8 The correlation between Value and Momentum (which is around -0.7 over the long-term) deepened to -0.9 this year.9

Equity Short Volatility was the second worst performer. The reason is similar to the story for December: while the factor’s underlying CBOE PutWrite Index produced positive returns, the final factor ended negative once it was residualized to Equity. 

Finally, while EM equities posted positive returns in 2019, they generally underperformed their developed counterparts, resulting in a negative return for the Emerging Markets factor. South Korea, which is the second largest country weight in the MSCI Emerging Markets Index10 (the equity component of the Emerging Markets factor), was one of the worst performing equity markets globally. The KOSPI 200 (the South Korean stock market index) was down 5% through August before recovering into year-end, due to its high sensitivity to trade tensions.11


2019 factor performance image(2003 start)


Thank you for taking the time to read our monthly Venn Factor Performance Reports this year. To receive timely alerts on factor performance and/or to conduct analysis on the historical performance of the factors, sign up for Venn for free.



1 Source: WSJ article “Trump Says He Will Sign Phase-One Trade Deal With China on Jan. 15” on December 31, 2019.

2 Source: Venn by Two Sigma..

3 Source: Federal Reserve Bank of St. Louis ICE BofAML US High Yield Master II Option-Adjusted Spread and ICE BofAML Euro High Yield Index Option-Adjusted Spread.

4 Source: J.P. Morgan Asset Management’s Review of markets over 2019.

5 Source: Trading Economics.

6 Examples: The Federal Reserve cut rates three times in 2019, the ECB expanded its balance sheet in the fourth quarter, and China reduced its reserve requirement ratio three times in 2019.

7 Source: Federal Reserve Bank of St. Louis ICE BofAML US High Yield Master II Option-Adjusted Spread and ICE BofAML Euro High Yield Index Option-Adjusted Spread.

8 Source: Venn by Two Sigma Factor Insights.

9 Source: Venn by Two Sigma Factor Insights.

10 Source: MSCI Emerging Markets Index (USD) factsheet.

11 Source: Two Sigma Advisors.


This article is not an endorsement by Two Sigma Investor Solutions, LP or any of its affiliates (collectively, “Two Sigma”) of the topics discussed. The views expressed above reflect those of the authors and are not necessarily the views of Two Sigma. This article (i) is only for informational and educational purposes, (ii) is not intended to provide, and should not be relied upon, for investment, accounting, legal or tax advice, and (iii) is not a recommendation as to any portfolio, allocation, strategy or investment. This article is not an offer to sell or the solicitation of an offer to buy any securities or other instruments. This article is current as of the date of issuance (or any earlier date as referenced herein) and is subject to change without notice. The analytics or other services available on Venn change frequently and the content of this article should be expected to become outdated and less accurate over time. Any statements regarding planned or future development efforts for our existing or new products or services are not intended to be a promise or guarantee of future availability of products, services, or features.  Such statements merely reflect our current plans.  They are not intended to indicate when or how particular features will be offered or at what price.  These planned or future development efforts may change without notice. Two Sigma has no obligation to update the article nor does Two Sigma make any express or implied warranties or representations as to its completeness or accuracy. This material uses some trademarks owned by entities other than Two Sigma purely for identification and comment as fair nominative use. That use does not imply any association with or endorsement of the other company by Two Sigma, or vice versa. See the end of the document for other important disclaimers and disclosures. Click here for other important disclaimers and disclosures.

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