Investors around the globe benefitted from exposure to high beta and short-term volatility in July amid geopolitical complexities with increased pressures from China, revealed data from Investment Metrics.
According to the ‘July 2023 Face Performance Analysis’ report, global equity markets continued their momentum from Q1 and Q2 as the MSCI ACWI index returned an additional 3%.
European equities “slightly outperformed” the UK with a 3.5% return in July. The factor performance trend from June became much more pronounced as high-value and volatility stocks outperformed by about 50 and 80 bps, respectively.
The data provider noted the focus on forecast growth seen throughout Q1 and Q2 has receded as growth stocks performed neutrally to the European market. Stocks with high forecast growth over the next 12 months underperformed the market by 40 bps. Notable outperformers included value stocks like Dutch automotive manufacturing company Stellantis (+17%), Italian banking group Intesa Sanpaolo (+10%) and German shipping firm Hapag-Lloyd (+12%).
In July, the UK’s public equity market realised a positive return, with investors preferring high-beta and value equities. However, similar to Europe, manufacturing has been steadily declining in the UK, stated the report. The S&P Purchasing Managers’ index fell to its lowest since 2020, and consumer confidence dipped in July owing to inflation and interest rates.
High volatility and mid-small cap companies at low prices led the UK in July, beating the market by 100bps. The report said that investors in companies with these metrics would have realised returns like passive exposures to European and American markets.
UK companies that delivered excess returns in July included financial services firm Standard Chartered PLC (+10%), Energy firm Centrica (+12%), and small-cap manufacturing company Mondi (+15%).
All emerging market regions observed increased premiums from exposure to volatility subfactors. Led by Chinese equities, several other countries enjoyed favourable returns as equities returned 6% overall. July’s trend favoured companies with increased forecast earnings growth over the next twelve months, and investors benefitted from being exposed to short-term volatility.
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