July witnessed a strong recovery in the FT Wilshire 5000 index driven by a rally in growth stocks. Mounting concerns about recessionary headwinds boosted demand for long duration growth stocks by reducing discount rates (via lower nominal and real yields) and by increasing demand for their defensive attributes. The 9.6% rally in the FT Wilshire 5000 was the fifth largest monthly return in the last 20 years.

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Chart 1: The fifth largest monthly return over the last 20 years

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^{Source: Wilshire}

Chart 2: Large-cap growth relative performance has responded to declining real yields

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^{Source: Wilshire, FactSet}

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‍The Technology, Consumer Goods and Digital Info sectors drove Growth performance

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Sector weighted performance contributions take account of both the performance and respective sector weightings. Comparing the sector weighted contributions for large-cap growth and large cap value in July, it can be seen that the majority of growth's 6.4% outperformance relative to value was due to the size of the respective contributions from the key growth sectors - Technology, Consumer Goods and Services and Digital Information.

Chart 3: The sector weighted contributions to July performance

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^{Source: Wilshire}

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^{Index 15303321 E0922}‍

Low beta and Value were the best performing factors with momentum lagging. The "Pure" quality factor also outperformed reflecting increased risk aversion. The 16% outperformance of the Value style relative to Growth was a notable feature of the first half of the year.

A rotation to Low Beta and Value

The first half of 2022 produced large rotation in factors utilizing the FT Wilshire "Pure" factor methodology and data. In terms of relative performance, the Low Beta and Value Factors outperformed the most (responding to rising real yields) with the momentum factor underperforming significantly.

The Pure quality factor also outperformed

Interestingly the "Pure" Quality factor outperformed as well (unlike most other Quality Factor indices) - this reflects the Pure Factor methodology stripping away unintended sector and factor exposures. The outperformance of the quality factor reflected the desire to seek protection against recessionary headwinds.

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Chart 1: Pure factor relative performance YTD

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_{Source: Wilshire}

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Mapping the progression of Pure Factor relative performance YTD

Value has persistently outperformed while quality outperformed strongly in Q2. By contrast Momentum declined significantly in Q2 .

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Chart 2: Relative return of Pure Factors YTD

^{Source: Wilshire}

Value outperformance the key feature of the FT Wilshire 500 Size and Style Index returns

In terms of the size indices large and small delivered similar returns YTD with Micro cap slightly underperforming. The scale of the Value style outperformance was the key feature in the first half of 2022.

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Chart 3: FT Wilshire 5000 size and style returns

^{Source: Wilshire}

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A notable feature of 2022 market dynamics has been the 16% outperformance of Value  relative to Growth. The Growth /Value relative return ratio appears to be returning to pre-Covid levels

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Chart 4: Growth Style Index returns relative to Value

^{Source: Wilshire}

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^{Index 15303321 E0922}