Since their peak on February 19, global equities have lost between 20-36% in performance as coronavirus fears have sent investors into a panic. Within fixed income, high-yield credits have registered negative returns of up to 16%, while investment-grade corporates have held up comparatively well.
The best returns were seen in government bonds, as investors have sought their perceived relative safety. Oil has fallen by 50% to date.
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With the attention of investors being increasingly focused on sustainability issues, awareness of Environmental, Social and Governance ratings characteristics is essential, as it enables a better overview of their meaning.
Data since the Global Financial Crisis (GFC) demonstrates that the link between factors and economic cycles is broken—and in effect, the traditional “Investment Clock” framework for explaining factor behaviour is no longer applicable. If we look to evolve this thinking for the post-GFC period, we find in our recent paper that economic volatility regimes have a significant impact on factor payoffs.
When US equity markets reached the bottom one year ago at the onset of the pandemic, US microcap stocks were dealt a particularly sharp blow. They subsequently rebounded alongside all US equity market cap segments, but their performance continued to lag their larger size segment counterparts—until the events of early 2021 when US microcaps soared above the rest.
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