Investors in high beta strategies were rewarded in November, a month characterized by easing inflation and optimism surrounding a potential slowing pace of U.S. rate hikes.
Positive performance was observed across the board in November. During the month, the S&P 500 posted its second consecutive month of gains, with a total return of 5.6%, while the S&P MidCap 400 and S&P SmallCap 600 were up 6.1% and 4.2%, respectively.
U.S. fixed income index performances were also positive across the board as Treasury yields declined as a result of easing inflation.
Notably, every S&P 500 factor-based equity index rose in November, with the S&P 500 High Beta being the top performer during the month. High beta, tracked by the Invesco S&P 500 High Beta ETF (SPHB ), increased 9.5% during the month, bringing its quarter-to-date gains to 19.1%. The index is down -12.9% year-to-date.
SPHB invests at least 90% of its total assets in the securities that comprise the index, which is compiled, maintained, and calculated by Standard & Poor’s and consists of the 100 stocks from the S&P 500 Index with the highest sensitivity to market movements, or beta, over the past 12 months. The fund and the index are rebalanced and reconstituted quarterly in February, May, August, and November, according to Invesco.
The fund’s focus on stocks that have a high beta could increase the volatility of this product when compared to more broad-based funds. However, this higher volatility could lead to greater gains when markets are trending upwards — such as November — but it could also lead to bigger losses when markets experience broad sell-offs as well, something observed earlier in the year. If the uptrend seen this quarter to date continues, risk-enhancing factors are likely to continue to be the stronger performers.
SPHB charges a 25 basis point expense ratio.
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