Factor Lab Daily Brief 2026-06-13
Momentum ICIR 2.70 dominates; high-valuation reversal strengthens; IT sector momentum sole leader, healthcare shows significant reversal
Factor IC Testing (S&P 500 · 39-Week Lookback)
| Factor | IC Mean | ICIR | t-stat | p-value | Long-Short (Q1-Q5) |
|---|---|---|---|---|---|
| MOM Momentum | +0.224 | +2.70 | 16.62 | 0.000 | -8.07% |
| SIZE Market Cap | +0.048 | +1.25 | 7.70 | 0.000 | -2.06% |
| FCF_YIELD Free Cash Flow | -0.059 | -1.43 | -8.79 | 0.000 | +3.04% |
| ROE Earnings Quality | -0.041 | -1.23 | -7.58 | 0.000 | +1.11% |
| VOL Volatility | +0.132 | +1.05 | 6.48 | 0.000 | -7.61% |
| EP Earnings Yield | -0.062 | -0.74 | -4.57 | 0.000 | +3.87% |
| BP Book Value | +0.006 | +0.08 | 0.48 | 0.635 | +0.82% |
Key Findings:
- Momentum dominates: ICIR = 2.70, IC positive rate 100% — every single week over 39 weeks confirms direction. Q5 momentum portfolio annualizes +7.95%, vastly outpacing Q1 at -0.12%.
- Valuation factors remain broken: EP (ICIR -0.74), ROE (ICIR -1.23), and FCF Yield (ICIR -1.43) all show significant negative IC — profitable, high-valuation stocks underperform. The market is paying for growth, not value.
- BP is noise: ICIR 0.08, t-stat 0.48 — book value has zero predictive power.
- Volatility + Size double signal: VOL (ICIR 1.05) and SIZE (ICIR 1.25) both positive and significant, reinforcing the momentum narrative.
Sector Momentum Decomposition
| Sector | IC Mean | ICIR | Q5 Long | L/S | Direction |
|---|---|---|---|---|---|
| Information Technology | +0.524 | +2.58 | +27.19% | -28.54% | Strong positive |
| Industrials | +0.266 | +2.88 | +5.51% | -7.14% | Strong positive |
| Financials | +0.309 | +2.63 | +7.80% | -7.19% | Strong positive |
| Consumer Discretionary | +0.252 | +2.11 | +2.15% | -6.21% | Positive |
| Consumer Staples | +0.209 | +1.34 | +0.02% | -4.67% | Weak positive |
| Utilities | +0.199 | +1.01 | -1.66% | -0.63% | Weak positive |
| Real Estate | +0.124 | +0.84 | +4.95% | -3.83% | Weak positive |
| Health Care | -0.128 | -1.21 | -2.66% | +7.51% | ⚠️ Inverse |
Sector Signals:
- IT momentum crushing: IC 0.524, Q5 +27.19% — the AI/semiconductor narrative continues to amplify momentum effects. ICIR 2.58 = near-perfect consistency.
- Healthcare reversal: The only sector with negative IC (-0.128, ICIR -1.21). Underperforming healthcare stocks now rally in Q1 (+4.84%). Classic defensive reversal — risk-off rotation is underway.
- Financials + Industrials dual strength: Both cyclical sectors maintain ICIR >2.5, confirming the economic cycle factor is still operative.
Strategic Implications
- Chasing winners works — but only in IT, Financials, and Industrials. All other sectors show momentum decay.
- Defensive window opening: Healthcare reversal signal + FNG entering Fear territory (see FNG report) — overweight defensive assets.
- Valuation still broken: Don’t bottom-fish on cheap valuation alone — the market continues paying for growth and momentum.
- Risk warning: Momentum factor is extremely crowded (39 weeks of 100% directional consistency). When it turns, the unwind could be severe.