High Beta, Growth Factors Lead in Q1 Performance | ETF Trends

Defensive strategies lagged while high beta and growth led among factors during the first quarter.

What worked best during the first quarter was a sharp pivot from what worked in 2023. While yield- and value-oriented factors dominated in 2022, they were the worst performers in March. Meanwhile, high beta and growth were among the three worst-performing factors last year, but they were the two top-performing factors during the first quarter of 2023.

The S&P 500 rose by 3.7% in March, bringing its return for the first quarter of 2023 to 7.5%. The best-performing S&P 500 factor index during the first quarter was high beta, up 12.5%, trailed by growth, which was up 5.9%.

The gap between value and growth was negligible in January and February, but in March, growth outperformed by 4.5%, according to S&P Dow Jones Indices.

The market has favored large companies and growth stocks this year, and a flight to quality sentiment meant that information technology and communication services were the best-performing sectors for the quarter, up 22% and 21%, respectively, according to S&P Dow Jones Indices.

Investors can add exposure to the high beta factor index with the Invesco S&P 500 High Beta ETF (SPHB).

SPHB’s methodology introduced sector tilts to a portfolio. Compared to the S&P 500, high beta is significantly underweight to healthcare and consumer staples, while overweighting the informational technology and consumer discretionary sectors.

SPHB has $593 million in assets under management and has taken in $129 million in net flows over a three-month period. SPHB charges a 25 basis point expense ratio.

Holdings in SPHB as of April 3 include NVIDIA Corporation (NVDA), Advanced Micro Devices Inc. (AMD), Monolithic Power Systems Inc. (MPWR), Meta Platforms Inc. (META), and Caesars Entertainment Inc. (CZR), according to ETF Database.

For more news, information, and analysis, visit the Innovative ETFs Channel.