Although 2019 marked a year-long rally for the stock market, a recent Barron’s article notes that, “underneath the broad optimism,” various factor groups moved in and out of favor along with a shifting macroeconomic environment.

The article outlined the year’s events and the corresponding impacts:

• In the first four months of the year, all factor groups were “running close to each other” with high-quality and growth stocks performing slightly better. But the increased tariff on Chinese imports imposed by the president in May shocked the market, triggering a flight-to-safety by investors to low-volatility strategies. Value stocks “crashed hard.”
• In July, the Fed took a “dovish stand and reduced the target interest rate” for the first time since the financial crisis, telegraphing more cuts on the horizon. Bond investors “sharply reversed their gloomy outlook on the economy to become optimistic again.”
• Investors returned to bargain-hunting and value stocks—after nearly a decade of underperformance— “started picking up to outpace their growth peers.”
• “On the back of an improving economy, bond yields continued to rise, stocks climbed higher, and the value rebound sustained through the end of the year.”
• But low-volatility and momentum stocks, the best-performing factor groups earlier in 2019, “lost their charm in the final third of the year.” As investors saw bond yields rise, defensive stocks lost their appeal.
• The biggest winners of the year were higher-quality stocks with low leverage and strong profitability.

The article concludes, “Standing at the beginning of a new year, when the global economy’s future path still seems foggy—and amid stirring of possible military conflict—factor investors should expect to weather still more shifts in trends.”