November Factor Performance Report Chart

Notable Performance of Factors in the Two Sigma Factor Lens

  • The Equity and Credit factors rallied in November. 
    • Optimism around the possibility of a “phase-one” trade deal between the U.S. and China, combined with improving economic activity (such as upwardly revised, better-than-expected third quarter U.S. GDP results and a pickup in German manufacturing activity in Europe), appears to have buoyed equity markets.1
    • High yield spreads in the U.S. and Europe declined over the month.2
  • Other factors did not fare so well:
    • In terms of the macro factors:
      • The Commodities factor was down last month. Several commodities suffered, including natural gas, precious metals, and some important agricultural commodities like soybeans and corn.3
      • Global yields generally ended the month higher, putting downward pressure on the Interest Rates factor, which is represented by a global government bond index.4
      • The Foreign Currency factor posted negative returns, as the U.S. dollar generally outperformed other G10 currencies.
      • The PutWrite index that underlies the Equity Short Volatility factor ended November positive, but that index is also driven by Equity beta (which performed strongly, as noted above). Once residualized to Equity, the Equity Short Volatility factor return was negative.
    • In terms of the equity style factors:
      • Value ended up underperforming Momentum in November despite a strong start to the month (in the first full week, Value was up +1.5% versus Momentum’s -3.6%).
      • The Low Risk factor underperformed relative to its median monthly return, with both components (Residual Volatility and Beta) contributing to its poor performance.
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1 Sources: WSJ article “U.S. Growth Enters Fourth Quarter on More Solid Footing” on November 28, 2019 and Trading Economics.

2 Source: Federal Reserve Bank of St. Louis.

3 Source: Trading Economics.

4 Source: Trading Economics.

Median and percentile measures 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 - November 2019.


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