Research Signals - September 2020

Many regional stock markets struggled in September, trimming their advance over the quarter, with concerns that the rising number of coronavirus cases may result in further restrictions to contain its spread. However, investors sought high momentum stocks, while avoiding undervalued names across most of our coverage universes (Table 1). Business sentiment also hit its highest level since May 2018, according to the J.P.Morgan Global Manufacturing PMI survey, with the headline figure rising to a 25-month high.

• US: Price Momentum measures returned to their leading role, replacing Deep Value which traversed to the bottom of the factor performance spectrum, as confirmed directionally by Industry-adjusted 12-month Relative Price Strength and Book-to-Market, respectively
• Developed Europe: Investors' style preferences mirrored that of US large caps, as captured by outperformance to measures such as Rational Decay Alpha and underperformance to Book-to-Market
• Developed Pacific: Demand Supply Ratio, a Short Sentiment indicator measuring the amount of stock borrowed relative to its lendable inventory, was a highly rewarded indicator in markets outside Japan
• Emerging markets: Investors showed a preference for high momentum stocks (e.g., Rational Decay Alpha), while avoiding high risk names (e.g., 60-Month Beta)

Table 1

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.