Factor and style model performance: 2021 record book

Research Signals - January 2022

2021 was a year of records, as stocks extended prior year gains following the significant disruption in economic activity caused by the COVID-19 pandemic. Tailwinds from both monetary and fiscal stimulus helped push stocks to all-time highs in several major markets including the US and Europe, though elevated inflation may turn into a headwind as central banks switch to a new tightening regime. Value factors staged a comeback, though with some interruptions, in 2021 (Table 1) after an extended period of underperformance since 2007, as yields and, in turn, the value/growth cycle reacted to the developing inflation and economic growth expectations priced into equity and bond markets.

• US: Our thematic models turned in strong results in 2021, especially among small caps, led by Value Momentum and Deep Value Models
• Developed Europe: Net Operating Asset Turnover and Reinvestment Rate outperformed on average last year, alongside valuation measures
• Developed Pacific: The Deep Value Model and related factors such as Book-to-Market were rewarded throughout much of 2021
• Emerging markets: The Earnings Momentum Model and its component measure, 3-M Revision in FY2 EPS Forecasts, were once again successful in distinguishing winners from losers on average last year

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.