IDAT - Quality Is Now A Momentum Trade
2024-05-08 08:15:00 ET
Summary
- Year to date, technology related companies have been the market leaders, with an increased focus on the ability to generate cash-flow. From a style factor lens, momentum has been the winner.
- Historically, this style has often been associated with more speculative, lower-quality parts of the market. Today, momentum names are increasingly high-quality businesses with consistent profitability – something investors are willing to pay a premium for.
- More recently, as recession fears fade and a soft-landing seems to be taking hold, momentum has enjoyed a resurgence.
Originally published on April 3, 2024
Markets have been on a tear, driven by solid earnings and a benign economic backdrop. And while a chorus of commentators is increasingly pointing to a replay of the late 1990s technology bubble, there is one important difference: cash flow generation. Today's technology-related market leaders are incredibly powerful businesses levered to long-term secular trends. While this does not guarantee perpetual dominance, and valuations do ultimately matter, we believe it can support the trend to continue in the near-term....
Quality Is Now A Momentum Trade