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Morning Notes — Value


May 21, 2021

Momentum is a popular input for the vast majority of systematic factor models.  As the economy continues to recover, the 12-month momentum factor will begin picking up more and more value sector correlation as the worst days of value performance fall out of the 12-month window and the best days fall into the window.  Value sectors are also fundamentally more attractive due to fixed-cost structures and rising prices.  Value sectors are approaching escape velocity on policy-induced inflation, higher bond yields, steeper yield curve, reopening, light positioning and now the 12-month momentum window.  Value sectors like Financials, Materials and Energy should have the support they need for continued outperformance in the months ahead.

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