Dividend Yield, Growth, & Momentum

Here are a couple of quick updates on some factors that we've discussed in recent weeks.

‍Dividend Yield / Growth Update
Last week, we highlighted the Dividend Yield factor in our US model.

• At the time, our Factor Profile tool had isolated it as being “Extremely Oversold” at -2.24 standard deviations below the historical mean on a normalized basis.
• Today, this factor sits at -2.31 SD below the mean, after bottoming out at -2.33 SD below the mean on July 24th.
• On a cumulative basis, we've seen the factor rally 7 bps in the past week (-0.46% > -0.39%).

As we discussed last week, there's a negative correlation between Dividend Yield and Growth (see below):

This makes sense as we've seen the Dividend Yield factor rally in periods of slower growth, and sell off in periods of higher growth.

We can see this relationship play out in the Growth factor's recent performance:

• On July 19th, this factor was +1.37 SD above the mean (normalized), and has since fallen to +1.31 SD above the mean after hitting a peak of +1.42 SD above the mean on July 23rd.
• On a cumulative basis, return for Growth has fallen from -0.46% to -0.57% in just the past week.

Medium-Term Momentum

On July 12th, we flagged Medium-Term Momentum (one of the most closely followed factors in the market) as being "Oversold" at -1.54 SD below the mean (normalized).

In the past two weeks, this factor has rallied +84 bps on a cumulative basis, and now sits at -0.93 SD below the mean, which our Factor Profile tool considers to be "Neutral" territory.

Pulling the lens back, the trailing 12-month chart shows how sharply this rally has played out:

As we mentioned a couple of months ago, the sectors that are currently most correlated with Medium-Term Momentum are Software, IT, and Semiconductors.

If you'd like to see the impact of any of these factors on your portfolio's performance and risk profile, or would like to better understand how we measure the relationships between factors, please don't hesitate to reach out.

Regards,
Omer