Momentum still leads, but is it coming up lame?
U.S. equity index futures slightly green: Nasdaq 100 up ~0.3%
Euro STOXX 600 index up ~0.1%
Dollar ~flat; gold gains; crude up >1%; bitcoin up ~2%
U.S. 10-Year Treasury yield edges up to ~3.95%
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MOMENTUM STILL LEADS, BUT IS IT COMING UP LAME?
When it comes to major style factors that have historically driven portfolio returns, Momentum is the horse that's leading the pack this year. However, so far this quarter, it's been the weakest style factor, while more defensive groups have perked up.
Major investing style factors include stocks discounted to their fundamentals (Value), financially-sound companies (Quality), size (Small Caps), stable, lower-risk stocks (Low Volatility), and stocks exhibiting upward price trends (Momentum).
To this, let's add in as separate factors Mid- and Large-Caps, high-growth companies (Growth), and those stocks that provide income (Dividends).
The SPDR S&P 500 ETF Trust SPY.P is down 2.1% quarter-to-date (QTD), bringing its year-to-date (YTD) gain to 12.1%.
Here is a graphic showing YTD factor percentage changes as well as how they have performed vs the SPY (factor/SPY ratio change):
Momentum MTUM.K is out front with a 17.7% YTD advance. It's closely followed by Growth SPYG.P, up 17.2%. Quality QUAL.Z, up 14.4%, is next in line. All of these groups are outperforming the SPY in 2024.
Large Caps SCHX.P are up 11.7%, which puts them just off the SPY's YTD pace.
Low Volatility SPLV.P (+8.4%), Value SPYV.P (+6.8%), Mid-caps IJH.P (+5.8%), and Dividends NOBL.K (+5.0%) are all positive for the year, but are well underperforming the SPY.
Small Caps IWM.P (+2.9%) are also positive for 2024, however, they are showing the smallest rise, and are the biggest laggard vs the SPY this year.
Perhaps, not surprisingly, given QTD market instability, this year's winners have slowed up. Since the end of June, Momentum ranks last among the style factors, having fallen 5.2%. Growth is down 4.9% over this period.
Defensive groups such as Low Volatility, up 4.6% QTD, and Dividends, up 4%, have started to shine.
In any event, with nearly two-thirds of 2024 in the books, traders will be keeping a close eye on all these factors as they continue to jockey for position through the rest of the year.
(Terence Gabriel)
*****
FOR MONDAY'S EARLIER LIVE MARKETS POSTS:
LACK OF DIRECTION TO KEEP S&P 500 RANGE BOUND - MS - CLICK HERE
FADE THE REBOUND IN STOCKS AND BONDS - BCA RESEARCH - CLICK HERE
MARKETS SERENE BUT SENSITIVE AHEAD OF KEY US DATA - CLICK HERE
SUMMERTIME SADNESS - CLICK HERE
SMOOTH SAILING - CLICK HERE
FUTURES IN THE GREEN - CLICK HERE
MARKETS SHIFT TO HOLIDAY MOOD - CLICK HERE
2024StyleFacrors08122024 https://tmsnrt.rs/3M4YdY1
(Terence Gabriel is a Reuters market analyst. The views expressed are his own)
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