Investor optimism saw its longest continuous positive period in three years in January, as the ‘risk on’ environment drove global equities to their highest level since 2008.
Hermes Quantitative Equities’ global Investor Risk Aversion indicator – which measures fear in the market to identify whether investors are seeking high or low-risk assets – was in Optimistic territory for every day in January. This is the longest period of sustained optimism since the beginning of 2010.
Stocks exhibiting positive Sentiment factors outperformed for the first January since 2009 last month, as markets were buoyed by heightened investor optimism.
Outperformance of Sentiment factors was predominantly driven by companies in Japan, where the difference in returns between the stocks ranked best and worst was close to 4%. The Sentiment category – one of the six Alpha Factors by which Hermes Quantitative Equities’ measures the attractiveness of an investment – measures investors’ appetite for securities.
Alongside Sentiment factors, stocks exhibiting attractive Valuation factors once again rose strongly, posting their sixth consecutive positive monthly return in January 2013.