Leaving aside all the other things happening in the world, the past three months were remarkable for a reversal in the stock market. After years when their performance was overshadowed by the giants of the S&P 500, value stocks made an unexpected comeback after the US election when Pfizer announced the successful results of a Covid vaccine trial.

Since the overall index was at record highs, the phenomenon was not widely appreciated, but is reported to have hammered well-known quantitative hedge funds such as Renaissance and Two Sigma. Portfolios constructed using the hitherto successful momentum factor suddenly underperformed to the tune of six standard deviations.

Risky Finance can provide some immediate insights using our equity visualisation tool. Start by recalling the kind of portfolio we constructed by adding S&P 500 stocks in order of decreasing market cap at the start of a time period, and seeing how the cumulative returns behave as the portfolio grows (see the chart below).