Hal Reynolds, chief investment officer, Los Angeles Capital Management
Quantitative strategies struggled to deliver in 2019 largely due to the underperformance of a number of key factors – common characteristics among stocks used to create portfolios and that underpin many quantitative processes – including value, momentum, and quality.
Looking forward, the biggest question in markets in my view is whether the oft-heralded reversal of the outperformance of growth stocks to value stocks will occur in 2020.
There are two schools of thought here. The first is that value is dead. Value has underperformed growth for over a decade, and its reputation this year, in particular, has taken a battering.
The second camp argues that value is poised for a 2000-2007 like rebound.
Our sentiment analysis, however, shows that growth stocks remain in favour. As such, relative to value stocks, our portfolios are still overweight growth stocks.
Value is not dead but it remains dormant for the time being.