Low Beta Outperforms During High Volatility
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Amid the turmoil in the EU, low beta names look more attractive, according David Koenig, Investment Strategist at Russell Investments. May returns clearly illustrated how volatility effects performs, as the Russell-Axioma U.S. Large Cap Low Beta Index outperformed the U.S. large-cap Russell 1000® Index by 320 basis points. However, year-to-date growth stocks have outperformed.
“Low beta stocks look well positioned in the current market environment, as returns are being driven primarily by macro events rather than idiosyncratic risk,” said Koenig.
Last month momentum rotated out of energy and financials and into higher-quality names within the consumer discretionary and health care sectors, noted the study. And while there is definitely potential for high momentum stocks to continue to outperform in both rising and falling markets, during periods of high volatility returns will likely lag.
“Low beta stocks look well positioned in the current market environment, as returns are being driven primarily by macro events rather than idiosyncratic risk,” said Koenig.
Last month momentum rotated out of energy and financials and into higher-quality names within the consumer discretionary and health care sectors, noted the study. And while there is definitely potential for high momentum stocks to continue to outperform in both rising and falling markets, during periods of high volatility returns will likely lag.
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