Breaking News
Get 40% Off 0
👀 Reveal Warren Buffett's stock picks that are beating the S&P 500 by +174.3% Get 40% Off

Large-Cap Stocks Continue to Lead US Equity Factors in 2023

By James PicernoStock MarketsOct 26, 2023 07:40AM ET
www.investing.com/analysis/largecap-stocks-continue-to-lead-us-equity-factors-in-2023-200643075
Large-Cap Stocks Continue to Lead US Equity Factors in 2023
By James Picerno   |  Oct 26, 2023 07:40AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
META
-0.82%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
QUAL
-0.07%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
GOOG
-2.81%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
XLK
0.00%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
IVW
-0.43%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
IJR
-0.51%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

Large-cap shares remain on track to dominate US equity factor performance for 2023, based on a set of ETFs through Wednesday’s close (Oct. 25). Within the large-cap space, technology shares are the driving force behind the outperformance.

Year-to-date factor results are currently led by two upside outliers: large-cap growth (IVW) and quality (QUAL). Each fund is currently posting a 15%-plus gain for 2023, far above the rest of the field.

ETFs YTD Returns
ETFs YTD Returns

In a sign of the times, the value factor’s drag is conspicuous, even within the large-cap space. The third-strongest factor performance this year is large-cap value, but IVE’s 4.6% year-to-date gain is far below the rise for large-cap growth (IVW) and its quality-focused counterpart (QUAL).

Another striking trend in equity factor horse race this year is the widespread weakness for small-cap stocks. All three varieties – growth (IJT), core (IJR) and value (IJS) – are posting losses year to date.

Yahoo Finance notes that “an interest rate tightening cycle has raised the cost of capital and punished companies with smaller market capitalizations that often have more volatile balance sheets and financing needs than their larger peers.”  The article relates that a JPMorgan study finds that by the end of 2021, 40% of companies in the Russell 2000 small-cap index were unprofitable.

Earlier this month, researchers at Bank of America advised: “Despite the fastest hiking cycle in 40+ years, we believe the impact to S&P 500 earnings will be manageable. The real risk is in the Russell 2000.”

The bullish aura from Big Tech has been a clear advantage for large-cap shares and for US-foreign comparisons. FT this week reports:

“Seven large US tech companies have driven all of the gains in global stocks this year, pushing the US dominance of equity markets to new heights. The so-called ‘magnificent seven’ — Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Meta (NASDAQ:META), Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL), Nvidia (NASDAQ:NVDA), and Tesla (NASDAQ:TSLA) — have been propping up the S&P 500 index of blue-chip US companies for most of the year because of investor excitement about the growth of artificial intelligence.”

The degree of the tech effect in year-to-date results is crystal clear when comparing the iShares Technology ETF (XLK) to the top-performing factor funds in 2023.

XLK-Daily Chart
XLK-Daily Chart

The main takeaway: Big Tech is at once a growth factor and a large-cap factor, and the combination is unbeatable, at least so far. Indeed, tech-sector weights are the outsized leader for big-cap growth (IVW) and quality (QUAL). For now, all roads to outperformance run through the Magnificent Seven Empire.

Large-Cap Stocks Continue to Lead US Equity Factors in 2023
 

Related Articles

Large-Cap Stocks Continue to Lead US Equity Factors in 2023

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Derick Lim
Derick Lim Oct 26, 2023 6:28PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Must had smoked and popped too much weed and pills ........
Deepu Rajbhar
Deepu Rajbhar Oct 26, 2023 6:28PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
DEEPU
Oct 26, 2023 6:28PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
how are you
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email