SPD - Equity Factor Report - Q4 2023: Growth Strategies Rally On The Prospect Of Lower Interest Rates

2024-01-31 04:28:00 ET

Summary

• In Russell Investments’ factor portfolios, the Global Large Cap Growth, Momentum and Size factors outperformed the MSCI All-Country World Index during Q4, while the Global Large Cap Value and Low Volatility factors underperformed the index. The Global Lage Cap Quality factor was flat for the quarter.
• In Q4, the strongest performance among factors was seen in U.S. Large Cap, where Growth and Momentum outperformed by 1.4% and 0.9%, respectively. The weakest performance among factors was in Developed ex-U.S. Large Cap, where the Value factor underperformed by -2.9%.
• Historically, the Momentum and Quality equity factors have been the strongest performers during periods of monetary easing, while the value and size factors have been the weakest.

Overview

Buoyed by the prospect of lower interest rates, global markets in Q4 2023 were characterized by a rally in technology companies, with the MSCI ACWI Index gaining by a robust 11.2% in the fourth quarter. During the quarter, investors became increasingly confident that inflation was no longer a threat and that lower interest rates were on the horizon. As the quarter progressed, and the prospect of a U.S. Federal Reserve (Fed) pivot took hold, technology stocks led by the Magnificent Seven rallied into the end of the quarter. Energy stocks, which were among the best performers in Q3, lagged in Q4. The MSCI Emerging Markets Index gained less (+7.9%) than the U.S. and MSCI World ex-U.S. Indices (+12% and +10.6%, respectively)....

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