S&P Dow Jones Indices: January 2021 reminded everyone that we’re not out of the woods just yet

S&P Dow Jones Indices: January 2021 reminded everyone that we’re not out of the woods just yet

February 1, 2021

Outlook vooruitzichten (08) weg storm crisis

Tim Edwards, Managing Director, Index Investment Strategy at S&P Dow Jones Indices comments that January began brightly for the S&P 500 and its factor family, as the steadily increasing number of administered COVID vaccines provided an unambiguously positive statistic. However, VIX® began to sound the alarm as the month entered its final week, and a sharp sell-off in the final trading sessions sent the benchmark to a monthly loss.  Most the S&P 500’s factor indices declined with it, but dividend-based strategies, and noncap-weighted value, were among the winners.  More broadly, the top-level trend reversal in S&P 500 factor trends that began in the second half of 2020 continued in January: smaller stocks outperformed larger, value outperformed growth, and riskier stocks outperformed less-volatile names.”

HIGHLIGHTS

  • According to our January S&P 500 Factor Dashboard (attached), risk was also the story within US factor performances.  Over the last three months, factor indices with a higher beta to the market have had much higher returns than would be supposed from their betas alone, while factors with a lower beta more than underperformed.
  • It wasn’t a bad month for everyone: American small caps skyrocketed, gaining 6%, and Chinese stocks lifted the S&P Pan Asia BMI to a gain on the month, helping the S&P Emerging BMI to finish with 3%.
  • The price of oil continued to rise, lifting the S&P GSCI and Energy equities with it.  And although riskier segments generally outperformed, Latin American stocks failed to notice; the S&P Latin America 40 declined 7.6%.

US

  • A steep sell-off in the last week of January led to a mixed month of performance for U.S. equities, with the S&P 500® posting a loss of 1%.
  • The reversal that began in Q4 of 2020 continued, as smaller caps outperformed in January, with the S&P MidCap 400® and the S&P SmallCap 600® up 2% and 6%, respectively.
  • Volatility spiked, as the short squeeze frenzy mounted among retail investors, with the VIX® closing the month at 33.09.
  • Performance in international markets was also mixed, with the S&P Developed Ex-U.S. BMI down 1% and the S&P Emerging BMI up 3%.
  • Low Volatility High Dividend and Enhanced Value were the top performing factors.

Europe

  • The S&P Europe 350® erased its gains in the final trading session, leaving the continent’s benchmark with a small loss for January.
  • Energy led among sectors of the S&P Europe 350, while Momentum led among factors. Value and Financials were among this month’s underperformers.
  • After calmer waters for the majority of January, equity volatility raised its head on both sides of the Atlantic as implied volatility measures rose to their highest since November.