High beta has been off to a strong start this year after being one of the worst-performing factors in 2022.
The S&P 500 increased by 0.7% on Tuesday, as yesterday’s data on rising wholesale inventories and falling trade sales bolstered hopes for easing of inflationary pressures, according to the S&P Dow Jones Indices daily dashboard. High beta took the top spot on the daily leaderboard on Tuesday with a gain of 1.4%.
High beta has outperformed its parent index by 4.6% month-to-date, trailing only the pure value factor, which is leading by 20 basis points. Investors can add exposure to the factor with the Invesco S&P 500 High Beta ETF (SPHB), which tracks the S&P 500 High Beta Index.
“When advisors embrace a risk-on approach to start 2023, SPHB is a great fund to consider because it focuses on the more volatile stocks within the high-quality large-cap index,” Todd Rosenbluth, head of research at VettaFi, said. “Advisors often will rotate away from low volatility to high beta when they feel risk is being handsomely rewarded.”
High beta’s rally follows a disappointing showing in 2022, when it was the worst-performing factor in December, declining -8.5%. High beta ended the year as the third worst-performing factor, trailed only by pure growth and growth.
High beta’s sector tilts have led to its month-to-date outperformance. Compared to the S&P 500, high beta is significantly underweight to healthcare, the worst-performing sector year-to-date, while overweight to the third-best performer, consumer discretionary, according to the S&P 500 Factor Dashboard.
SPHB has seen $796 million in outflows over a one-year period, as investors rotated into value-oriented strategies such as the Invesco S&P 500 Low Volatility ETF (SPLV) in 2022. SPHB charged a 25 basis point expense ratio.
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