Notable Performance of Factors in the Two Sigma Factor Lens
- The Foreign Currency factor delivered positive performance last month, as the U.S. dollar underperformed several currencies in the G10 due to progress on Brexit and the U.S.-China trade war.
- Notably, the British pound ended higher versus the U.S. dollar due in part to rising optimism that there would be a Brexit deal leading up to the October 31st deadline. Boris Johnson did eventually work out an exit deal with the European Union, but it was not approved by U.K. Parliament.1 The Brexit deadline was ultimately extended to January 2020.2
- The Equity factor started the first two days of the month down 2.5% due in part to disappointing U.S. factory data that highlighted the economic impact of the trade war.3 However, global equity markets rebounded to end October positive, as U.S. and China appeared to move closer to a partial trade deal.4
- The Interest Rates factor, which is constructed using global government 7-10 year bonds, ended October in the red. Yields were higher for several European sovereign bonds, notably in the U.K.5
- In September, we covered the unusual performance of Momentum and Value.6 In October, the two equity style factors continued their longer-term, multi-year trend of Momentum outperforming Value.
REFERENCES
1 Source: CNBC article "UK and EU agree on new Brexit deal in last-ditch talks" on October 17, 2019.
2 Source: BBC article "Brexit: Johnson agrees to Brexit extension - but urges election" on October 28, 2019.
3 Source: The New York Times article "Stocks Slide as Evidence Mounts of a Slowdown Fueled by Trade War" on October 2, 2019.
4 Source: CNBC article "US and China are close to finalizing some sections of trade deal, US trade representative says" on October 25, 2019.
5 Source: Trading Economics.
6 Read the September 2019 Venn Factor Performance Report.
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 - October 2019.
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