Source: Venn by Two Sigma. 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 March 1995 - September 2020.


Market Themes & Factor Performance Summary

  • September started on a rocky note with a notable equity market selloff on September 3rd that was led by a decline in tech names. Global tech was down nearly -5%, while the overall equity market declined around -2.5%.1 The Equity factor then continued to decline for the first three weeks of the month, reaching a maximum drawdown of -5.2%. It clawed back some losses in the final week of the month, but that was not nearly enough to pull the factor into positive territory for September.
      • In Emerging Markets, stocks outperformed their developed counterparts, contributing to the positive return for the Emerging Markets factor, which is residualized to all four core macro factors (i.e., Equity, Interest Rates, Credit, and Commodities). Emerging currencies also eked out small gains in September.
  • The Interest Rates factor started September strong as investors flocked to bonds when the stock market sold off early in the month.2 The factor then steadily continued its ascent for the remainder of September. 
  • In Commodities, energy sold off due to declining global demand and improvements in supply (OPEC reportedly had trouble enforcing cuts).3 Gold was also lower on declining demand for inflation hedges as inflation expectations fell.4 Silver dropped meaningfully as well in September, reaching a maximum drawdown of nearly -20%.5
  • The U.S. dollar posted gains in September after falling notably earlier in the quarter. The dollar appreciation hurt the Foreign Currency factor in the USD version of the factor lens.
    • Another notable currency move was the decline in the British pound, as there was a lack of progress in Brexit negotiations and the Bank of England explored the possibility of negative interest rates.6 This activity supported the nearly 2% monthly gain in the GBP version of the Foreign Currency factor.
  • In terms of the macro style factors:
    • Equity Short Volatility was the best performing factor in the USD version of the factor lens in September. The factor started the first few days of the month in negative territory as the VIX increased from 26.41 at the start of September to an intra-month high of 33.60 on September 3rd. The VIX came off that high to end the month at 26.37, benefitting the factor’s underlying index, the CBOE PutWrite Index. Since the factor is residualized to Equity, it was further supported by the fact that the VIX fell slightly over the month, during which Equity markets had a large down move.
  • In terms of the equity style factors:
    • Despite a strong start, September was ultimately another poor month for Value stocks, extending a longer period of underperformance. The factor is now down over -30% for the YTD period through the end of September. All four components are contributing to YTD losses, with Dividend Yield the worst performer.
    • The Crowding factor experienced another down month, as stocks that are heavily shorted by the investment community outperformed those that are not heavily shorted.
    • On a positive note, the Momentum factor saw gains in September. It was affected by the tech sell off early in the month, but it more than erased those early losses to end the month up 1.9%.

Interested in your portfolio's exposures to these factors?


1 Sources: Venn by Two Sigma, using the iShares Global Tech ETF and the global Equity factor, and

2 Source:

3 Source:

4 Source:

5 Source: Venn by Two Sigma's Silver rolled futures contract using data from Commodity Systems Inc.

6 Sources: and

References to the Two Sigma Factor Lens and other Venn methodologies are qualified in their entirety by the applicable documentation on Venn.

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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