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The Oppenheimer Russell Dynamic Multifactor ETFs remain in a “slowdown” regime, resulting from a combination of still-above-trend U.S. economic activity, but decreasing global risk appetite. Our Dynamic Multifactor ETFs remain tilted toward the quality and low volatility factors.
Our leading economic indicators continue to suggest the U.S. economy should grow above trend over the next few quarters. Business and consumer confidence remain high, and activity in manufacturing and construction continues to be strong. While monetary conditions are gradually tightening, the current policy stance is not restrictive, therefore supporting further economic growth.
U.S. investors continued to see positive equity returns as August pushed the current bull market’s longevity into record territory. Despite this, the global markets continued to be fragmented, with Europe, Japan, and emerging markets all finishing in the red. Emerging markets saw an especially sharp sell-off as local currency depreciation shook investor sentiment. As a result, our market sentiment indicator decelerated, suggesting weakening global risk appetite, confirming the continuation of a “slowdown” regime.
The momentum factor stuttered in July, but regained the top spot, outpacing the market on its way to posting August’s best return. Overall, August was a strong month for the year-to-date winners as the quality factor also posted strong results relative to the index. Both factors now sit more than 200 basis points above the market for the year.
Speaking of winners, the size factor outpaced the index for the month as the current trade war environment once again rewarded smaller companies. This carried over into small-caps, with the Russell 2000 outpacing the Russell 1000 for the fifth time out of the last six months.
Our Multi-Asset Team will continue to monitor the economic environment and global risk sentiment for signs of regime change, which we will reflect in the potential monthly repositioning of the Dynamic Multi-Factor ETFs.
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Mutual funds and exchange traded funds are subject to market risk and volatility. Shares may gain or lose value. Alternative weighting approaches (i.e., using factor weighting as a measure), while designed to enhance potential returns, may not produce the desired results.
Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect backtested performance. All performance presented prior to the index inception date is backtested performance. Backtested performance is not actual performance, but is hypothetical. The backtest calculations are based on the same methodology that was in effect when the index was officially launched. However, backtested data may reflect the application of the index methodology with the benefit of hindsight, and the historic calculations of an index may change from month to month based on revisions to the underlying economic data used in the calculation of the index. Past performance does not guarantee future results.
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