It’s all about beta now — broad stock-market beta, which is a deeply negative year to date. Pulling free from that downside force via an equity strategy is challenging. Surprising? Not really. History clearly shows that return correlations within the equities space tend to move close to 1.0 during sharp corrections and bear markets. In line with that track record, the broad sell-off in US stocks so far this year has weighed on an expansive set of ETFs representing various equity factor risks. But the degree of pain varies widely, which suggests that factor diversification, while hardly a silver bullet, is still worthwhile.

From the 30,000-foot view, red ink dominates. On closer inspection, the degree of loss varies by more than trivial amounts. Notably, the high-dividend yield and small-cap value factors are currently nursing modest declines this year – less than a 3% slide, based on prices through yesterday’s close (Mar. 9). That’s substantially lighter than the overall market’s 10% haircut in 2022, based on SPDR S&P 500 (SPY) or the even-deeper equity factor losses in some of the hardest-hit corners.

Indeed, Vanguard High Dividend Yield (VYM) has delivered relatively steady performance year to date – no mean feat in a year of surging market volatility due to Russia’s invasion of Ukraine, inflation, and other issues.

Modest setbacks, however, are hardly the rule for equities in 2022. At the opposite end of the spectrum: large-cap growth. The former market darling for equity factors has fallen hard via iShares S&P 500 Growth ETF (IVW), which has tumbled 15% year to date.

Part of the year-to-date results appear to be linked to a rotation out of the high-flying growth stocks of 2021 to tamer slices of equities, i.e., those paying relatively high dividends and/or shares that are reasonably priced, at least when compared to growth. So it goes when the crowd turns fearful.

Keep in mind, however, that when the broad market beta is in retreat, escaping financial gravity is challenging, no matter how you slice and dice factor risk. Risk-off sentiment will pass at some point, although given the uncertainty of war and the breadth of global economic blowback in progress, timing has rarely been cloudier.

What is clear is that the tide has turned, and continues to turn, following a run of market activity that was previously assuming sunny skies far into the future. Just a few months ago most and sometimes all of the factor ETFs listed above were trending at maximum levels for bullishness, based on a set of moving averages. The short-term measure (red line in the chart below) has since collapsed to the most negative extreme. The medium-term measure (blue line) is still about midway between the two extremes, but falling sharply, which suggests that the downside pressure for equity factors, potentially, still has a long way to go.