Hidden factors: exploring equity market behaviour in 2020

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Insight

11 January 2021 |

Active ESG

At the beginning of a new year, it’s customary to look both back to the past and forward to the future. This year, it would be tempting to focus on a future in which the coronavirus is finally brought under control, gladly turning our backs on 2020 and consigning it to the annals of history. However, looking at the extreme market events of the past 12 months can provide some valuable insights for investors.

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In this issue of Equitorial, we explore the behaviour of the markets in 2020 through the lens of investment factors, looking at how the impact of macro events affected the performance of specific factors at different times.

In particular, we’ll look at three distinct, record-breaking events: the significant outperformance of companies with strong balance sheets in March, the long summer of growth, and the value rebound prompted by the announcement of a vaccine in November. Having explained 2020 from a factor investing perspective, we’ll offer a brief outlook on potential factor performance in 2021.