Momentum stocks plunged
Monday saw a 0.6% decline in the S&P 500, which doesn’t sound like anything to get excited about given the index is still up 27% on the year.
But actually, it was a historic day in one sense – momentum stocks plunged.
Momentum refers to the idea that stocks that have done well will continue to do so.
The winners will be winners, and the losers will be losers, a strategy that essentially outsources any investment analysis to the rest of the market, but one that has done exceedingly well this year – better, in fact, than any other investment factor.
Goldman Sachs has what it calls the “high beta momentum long/short index,” and on Monday that grouping tumbled 6.1%, its worst daily performance since Feb. 2023.
Morgan Stanley has its own momentum long index, which fell 4.4%;
Bloomberg’s ‘pure momentum’ factor suffered its worst day in two years.
The definitions slightly vary but all agreed that momo, as it’s called, was a mess.
Steve Goldstein MarketWatch 10 December 2024
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