2024-07-29 13:28:45 ET
Summary
- Momentum factor funds have performed very well YoY, with SPMO rising twice as fast as the S&P 500 due to its exposure to the "AI trade."
- As Nvidia, Apple, Microsoft, and others dominate SPMO, it is more exposed to the risk of a burst of the retail-driven "AI bubble."
- Low individual investor cash allocations may be a solid bearish indication for stocks that are more popular among individual investors.
- SPMO has outperformed the iShares Momentum ETF, MTUM, with relative consistency since 2022, potentially because of its less risk-averse approach.
- Technology stocks in SPMO may have less direct cyclical economic risk but more exposure to the possibility of a liquidity-driven stock market correction.
Momentum investing strategy ETFs, such as Invesco S&P 500® Momentum ETF ( SPMO ) rose in popularity in the late 2010s as the approach delivered significant outperformance to market-cap-weighted indices on a relatively consistent basis. These funds are designed to buy those large-cap stocks disproportionately with the best positive trends. In SPMO's case, it rebalances its holdings twice a year, giving it a relatively long-term approach to the momentum factor....
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For further details see:
SPMO: Momentum Style Is Losing Momentum As Rotation Grows