S&P Dow Jones Indices (S&P DJI) has published its Q2 factor indices dashboard for Europe, noting the second quarter performance of its range of factor indices derived from the broad market S&P Europe 350 Index. The firm reports that the quarter was positive for European equities in general, most factors still outperformed the broad market over this period, and Quality was the best performing strategy.

Quality was the best performing factor in Europe in Q2, gaining 3.4%.

Tim Edwards, senior director, index investment strategy at S&P DJI, commented: “Despite a moderate sell-off in the final week, the second quarter of 2017 was a positive one for European equities. Volatility remained reasonably low and the performances of our factor indices ended up in a tight range – only 5.3% separated the performance of the best from the worst.”

Quality was the best performing factor in Q2, gaining 3.4% and bringing its 12-month return to 16.2%. Enhanced Value came second with 2.9%, which marks a significant slowdown from previous quarters as the strategy has gained 41.5% over the past year. Low Volatility came third with a 2.6% quarterly gain, bringing the strategy’s 12-month performance to 12.5%.

Edwards notes: “Each of these indices has a current bias towards smaller stocks, which performed well this quarter. However, the three factors also outperformed Equal Weight, suggesting that there was more to their performance than just size alone.” Equal Weight gained 1.5% in Q2 and the market cap-weighted S&P Europe 350 Index rose 0.8%.

Momentum was a significant exception to the rule, with a negative return of -1.9%. “The poor performance wasn’t helped by a tilt towards larger stocks, but can also be associated to a turnaround in macro-economic trends,” said Edwards. “In particular, there was stark contrast between the anticipated political risk at the end of the prior quarter (when the world’s attention was turned to the French election), and that which was realized.”

The story was different over the pond in the US where Growth (5.3%), Momentum (4.4%), and Value (3.7%) exposures were drivers of performance. The S&P 500 Index gained 3.1% and the S&P 500 Equal Weight Index gained 2.5% over this period, indicating that size was not instrumental in driving outperformance. Factor indices remained in a tight range since the US election.