Factor performance review at a glance
The fourth quarter of 2019 ended the year in strong favour of Momentum factors, as Price Momentum (+4.6%) once again showed the strongest performance, backed up by Earnings Revisions (+3.7%). Quality factors performed poorly in 2019 and in the fourth quarter Return on Equity (-2.6%) as well as Debt to Equity (-1.7%) delivered disappointing returns. Value factors also performed poorly in the fourth quarter, with Dividend Yield (-4.1%) and Price to Book (-0.8%) delivering negative returns. On a positive note, Price to Book had a positive 2019. Dividend Yield was one of the poorest performers.
Key events that impacted performance in Q4 2019
The MSCI World (Developed Markets) returned an impressive 8.5% while MSCI Emerging Markets was up 13.1%. Global equities rallied behind signs of stabilising global growth and easing of trade tensions between the US and China, who announced in December that “Phase 1” of an agreement had been reached. In the UK, Eurosceptic Boris Johnson became the prime minister after being elected as leader of the Tories. Commodities were generally higher at the end of the quarter with Brent Crude, Gold, Palladium and Copper advancing 11.5%, 2.6%, 10.1% and 8.6% respectively. In South Africa this led to Resources (+13.4%) outperforming Financials (+2.5%) and Industrials (-0.05%). Industrials were negatively impacted by stage 6 load shedding. Despite the electricity situation and Moody’s revised outlook from stable to negative, the Rand ended the year at a remarkably stronger R14.01/US Dollar.