Kai W. Hong, CFA
Managing Director & Chief Investment Strategist
April marked the second consecutive month in which the markets struggled for direction. Buyers were buoyed by the Fed’s continuing accommodation and dovish tone regarding future interest-rate policy. Sellers focused on the turmoil in Ukraine and concerns over current market valuation. In the downdrafts, biotech and momentum stocks were particularly shunned. Economic data was mixed with strong US factory output but weaker jobs data; adding to the noise was an intensification of scrutiny of market functioning and high-frequency trading (HFT).
Active manager performance in this environment was somewhat variable. Overall market volatility and stock cross-sectional volatility continued to be at historically low levels. Size (smaller) and momentum factors were quite negative, while value, low volatility, and stability (e.g., lower earnings variability, lower leverage) were positive. In a manager-style context, this tended to benefit core managers who, as a group, are generally larger cap and more stability/defensively oriented. Growth managers (and particularly momentum players) were especially challenged.
