Invite ye felawes and frendes desirous in gold to enter the gates of Shrewd'm, for they will thanke ye later.
- Manlobbi
Halls of Shrewd'm / US Policy
No. of Recommendations: 3
When looking at a 1 year chart of Nasdaq/S&P it seems to me momentum is petering out. The steepness of the slope got constantly lower - until it´s not a slope anymore (now).
Looking at a longer timeframe it seems to resemble the situation end of 2024/beginning of 2025, before the Trump crash. While there is no reason to expect a similar event of this magnitude, I am wondering whether it´s not a sign of "everybody" already being fully invested now - with after some time a change of direction coming (according to Jim starting slowly, with a lot of time before it accelerates downward).
Any comments?
No. of Recommendations: 9
looking at a 1 year chart of Nasdaq/S&P it seems to me momentum is petering out.
What does "momentum is petering out" mean?
Momentum is simply "The stock price now vs. a year ago."
If you are a momentum investor, you buy things that are highest YOY in favor of things that are lower YOY or even down YOY.
That's it. When/if things are not favorable, you sell and wait it out.
You don't need to try to predict or mind-read the market and other market participants. You don't need to fret about "a sign of everybody already being fully invested".
Just buy & sell according to what the stocks are doing, without trying to figure out WHY they are doing what they are doing.
No. of Recommendations: 10
Another thing always to bear in mind that momentum strategies work extremely well most of the time, and horribly a small fraction of the time. The overall combined result is value added, but one should be aware of the spread of results going in.
So if your momentum strategy breaks once in a while with a horrible whipsaw (spring 2020 anyone?), don't be shocked or depressed. It's all expected as part of the long run averages.
By extension, one shouldn't worry about the fact that such a "break" in the system might (or might not) be imminent. It will be, or it won't be, but to the extent that you're running a strategy that truly adds value over time, it's just one rainy day.
Of course if you've picked a momentum strategy that doesn't actually have value-adding predictive power, life will be hard : )
Jim
No. of Recommendations: 5
I would call it a shift in WWL.
3- QAA : Market ETF's DCA Asset LT-12m IT-6m IT-3m ST-1m LRRS() TPPO()
Tuesday, February 3, 2026 Symbol Geo:Class ROC252 ROC126 ROC63 ROC21 %Rank Status:
iShares:MSCI Em Mkts EEM INT'L:EM 39.9% 16.6% 9.7% 6.9% 96% BUY
Invesco R SMid PRFZ US:SB 28.7% 11.6% 11.0% 3.1% 79% BUY
Invesco R US 1K PRF US:LV 23.7% 12.6% 8.5% 2.6% 66% BUY
Invesco S&P500 Top50 XLG US:LB 34.6% 9.4% 0.1% -0.9% 56% BUY
iShares:Core MSCI EAFE IEFA INT'L:Core 25.0% 9.2% 8.1% 4.5% 55% BUY
iShares:Blm RS Comm Str CMDY GL:CMDs 5.7% 2.3% -7.1% 11.7% 28% BUY
iShares:Core US REIT USRT US:REIT 2.0% 0.9% 0.4% 1.9% 20% BUY
iShares:20+ Trs Bd ETF TLT US:LTT -0.3% -0.3% -3.2% -0.1% 4% BUY
3- QAA : Market ETF's AveDev = 0.131 0.051 0.059 0.030 Wt(3,4,2,1) 3<6 & 6<12
GD_
No. of Recommendations: 9
Another thing always to bear in mind that momentum strategies work extremely well most of the time, and horribly a small fraction of the time. The overall combined result is value added, but one should be aware of the spread of results going in.
So if your momentum strategy breaks once in a while with a horrible whipsaw (spring 2020 anyone?), don't be shocked or depressed. It's all expected as part of the long run averages.
A few tidbits from my quotes file.
"It is universally acknowledged by practitioners and academics alike that the value and momentum factors are the two most persistent and universal methods of capturing excess returns in markets."
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"Prices don’t change when fundamentals change. Prices change when expectations and perceptions change and they could change for various reasons. From a trend follower’s perspective, the main indicator that signals changes in expectations is price. "
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"Leaving aside the potential performance advantages of trend following [i.e., momentum] for a moment, it is just less drama. Case in point, as a trend follower you can avoid getting caught up in the endless debate about whether or not the market is overvalued.
Prices change when expectations for future profits change. Expectations often change before fundamentals change. "
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"Q: why something that is as simple as a price-momentum strategy hasn’t been arbitraged away?
Hancock: I think the main reason for that is it’s just a very painful strategy to run ... when you’re using a price-momentum strategy you’re basically buying stocks that go up, and hoping they go up some more, but if they don’t, they go down, you sell them and buy the other ones that went up instead.
So, the situation in which you lose is you’ve just bought stuff that’s gone up, then it goes down, and then you sell it, and that just makes you look like an idiot, right? It’s a very uncomfortable thing to do.
The arbitrage is less with the strategy than with human nature. Most investors can’t capture the excess returns because they aren’t willing to deal with the difficult inflection points. -- Tom Hancock of GMO."
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" A feature of many winning investment strategies: the arbitrage involved is behavioral, not financial. Good returns derived from uncomfortable strategies do not get arbitraged away, because very few people will actually do it. "
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"the conclusion is that momentum is and always will be a very uncomfortable strategy to run. When it breaks, one is left without special hope of getting additional return, and one is forced to justify a strategy that on the surface of it sounds rather naïve. While the average outperformance is significant, it comes at the cost of occasional large drawdowns.
It is a painful way to lose. And fundamentally, it is the ability to bear that pain for which momentum investors are rewarded.
"A History of Consistent Outperformance, With Occasional Moments of Terror""
No. of Recommendations: 8
I would call it a shift in WWL...
As an aside, I once had a look at the recent relative performance of 13- and 26-week momentum strategies to look at persistence...depending on which one worked better recently, what did it say about which one was likely to work better next?
Rather to my surprise, whichever one did better in the last month is not very predictive of which one of them will do well in the next month, but it is surprisingly predictive of which way the market will go in the next month.
The effect wasn't strong enough to bet everything on it, but it seemed very much stronger than randomness would suggest. Maybe a good input for an "ensemble" timing model.
Jim
No. of Recommendations: 11
An easy way is simply to track recent performance of an ETF such as MTUM, a periodically rebalanced (~6 months) ETF of high performing (mostly megacap) stocks. Here's a current (daily updated) table I use to monitor "momentum" and choose the highest recent average performing asset classes (aka GTAA).
QMOM rank = excluding 1m return, rank of average of 2m, 6m, 12m return
2-12 R - rank of return by product of (-2m rtn,-3m rtn,-4m rtn,...-12m rtn)
AVERAGE = Average of QMOM rank & 2-12 rank.
Pure US-only "momentum" (megacap tech) has the worst 1 month total return and is apparently decreasing momentum.
Emerging Markets and EAFE stocks have the best sustained and recent momentum, by far.
QMOM rank 2-12 R 2-12RTN 1M 3M 6M 12M
AVERAGE
iShares Core MSCI Emerging Markets IEMG 1 1 1.262 5.59 8.23 19.81 33.22
iShares MSCI EAFE Small Cap Index Fund SCZ 2 2.0 1.238 4.56 10.11 11.49 29.40
iShares MSCI EAFE Index Fund EFA 3 3.0 1.212 4.78 8.97 14.24 26.95
Vanguard Global ex-U.S. Real Estate ETF VNQI 7 5.5 1.146 4.55 4.41 4.57 19.79
iShares MSCI USA Momentum ETF MTUM 7 6.0 1.137 -1.16 1.34 3.94 12.42
SPDR S&P 500 SPY 6 6.0 1.129 0.16 2.00 9.34 13.10
iShares S&P Small Cap 600 Growth ETF IJT 5 6.0 1.056 5.27 8.93 14.36 9.05
iShares Core S&P Small-Cap ETF IJR 4 6.0 1.050 6.67 11.32 19.33 12.01
SPDR Barclays 1-3 Month T-Bill ETF BIL 9 9.0 1.039 0.35 1.07 2.13 4.30
Vanguard REIT VNQ 10 10.0 0.981 4.24 3.33 2.73 1.22
FC
