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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.
Despite slightly positive returns in riskier U.S. assets, the story outside of the U.S. was more nuanced. International markets continued to show weakness across both developed and emerging market equities. European high-yield corporates and emerging market sovereign bonds lagged as the U.S. dollar continued to appreciate relative to most major currencies. In turn, our market sentiment indicator decelerated, suggesting weakening global risk appetite, confirming the continuation of a “slowdown” regime.
Low-volatility stocks kicked their recent trend of underperformance and were able to just outpace the index in a positive month for the equity markets. Investors seemed less concerned with the impact of rising rates over the period, as rates cooled toward the end of June.
June marks the fourth straight month during which the Russell 2000 Index outpaced the Russell 1000 Index. The small-cap rally carried over into the size factor index, which outpaced the market by 0.42%.
A combined tilt to both quality and low volatility factors was rewarded during the month, as the slowdown regime produced a higher return than any single factor index referenced. This highlights the potential of bottom-up factor allocation to amplify underlying factor performance.
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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OppenheimerFunds is not undertaking to provide impartial investment advice or to provide advice in a fiduciary capacity.
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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