Factor Lab Daily Report 2026-07-04
Momentum factor dominates (ICIR 2.70), value factors across-the-board negative, FCF Yield ICIR -1.43, Tech sector momentum premium hits 28.5%. Small-cap discount persists.
Overall Factor Performance
| Factor | ICIR | IC Mean | IC Win% | Q1 Return | Q5 Return | Q1-Q5 |
|---|---|---|---|---|---|---|
| Momentum | 2.70 | 0.224 | 100% | -0.1% | 7.9% | -8.1% |
| Low Volatility | 1.05 | 0.132 | 79.5% | 0.5% | 8.1% | -7.6% |
| Size | 1.25 | 0.048 | 87.2% | 2.5% | 4.5% | -2.1% |
| Book/Price | 0.08 | 0.006 | 46.2% | 3.9% | 3.1% | 0.8% |
| Earnings Yield | -0.74 | -0.062 | 17.9% | 6.4% | 2.5% | 3.9% |
| ROE | -1.23 | -0.041 | 12.8% | 4.8% | 3.7% | 1.1% |
| FCF Yield | -1.43 | -0.059 | 7.7% | 5.6% | 2.6% | 3.0% |
Factor IC Analysis
- Momentum: ICIR 2.70, 100% positive IC rate. Momentum effect in extremely strong state. Q5 winners returned 7.9% vs Q1 losers -0.1%.
- Low Volatility: ICIR 1.05, Q5 return 8.1% vs Q1 0.5%. Significant low-vol premium — market chasing certainty.
- Size: ICIR 1.25, large caps continue outperforming. Q5 4.5% vs Q1 2.5%.
- Value Factors Collapse: EP ICIR -0.74, ROE ICIR -1.23, FCF Yield ICIR -1.43. All three value dimensions negative — cheap/high-profit/high-FCF stocks underperforming across the board. Classic growth bull market pattern.
- Book/Price: ICIR 0.08, virtually zero differentiation.
Sector Momentum Decomposition
| Sector | ICIR | IC Mean | Q1 Return | Q5 Return | Q1-Q5 |
|---|---|---|---|---|---|
| Industrials | 2.88 | 0.266 | -1.6% | 5.5% | -7.1% |
| Financials | 2.63 | 0.309 | 0.6% | 7.8% | -7.2% |
| Technology | 2.58 | 0.524 | -1.4% | 27.2% | -28.5% |
| Consumer Disc. | 2.11 | 0.252 | -4.1% | 2.2% | -6.2% |
| Consumer Staples | 1.34 | 0.209 | -4.7% | 0.0% | -4.7% |
| Utilities | 1.01 | 0.199 | -2.3% | -1.7% | -0.6% |
| Real Estate | 0.84 | 0.124 | 1.1% | 4.9% | -3.8% |
| Health Care | -1.21 | -0.128 | 4.8% | -2.7% | 7.5% |
Key Signals
- Tech Momentum Premium 28.5%: Q5 winners 27.2% vs Q1 losers -1.4%. Extreme divergence — getting the stock right matters enormously.
- Health Care Momentum Reversal: Only sector with negative ICIR (-1.21). Prior winners underperforming significantly. Q1 4.8% vs Q5 -2.7%. Clear sector rotation underway.
- Industrials & Financials Strong: ICIR 2.88 and 2.63 respectively. Industrials Q5 5.5%, Financials Q5 7.8%.
- Consumer Discretionary Winners Weak: Despite ICIR 2.11, Q5 only 2.2%. Momentum driven more by loser weakness (Q1 -4.1%) than winner strength.
Strategy Implications
Momentum + Low Vol dual-factor approach remains effective. Value factors fully out of favor — don’t fight the trend by bottom-fishing value. Monitor Health Care momentum reversal as potential sector rotation signal. Tech momentum extreme with high winner concentration — crowding risk warrants caution.