US equity index futures modestly red; Nasdaq 100 off ~0.5%
Euro STOXX 600 index off ~0.2%
Dollar down; bitcoin dips; gold up ~2%; crude rallies >4.5%
US 10-Year Treasury yield edges up to ~4.44%
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MOMENTUM: ON THE FAST TRACK THIS YEAR
It's been a wild ride for markets so far in 2025.
From its February record high to its early April trough, the S&P 500 index .SPX nearly fell into bear-market territory. Since then, however, it's been on a tear.
In fact, in May the benchmark index posted its biggest monthly gain since November 2023. Additionally, it was the S&P 500's best May gain since 1990!
The SPX is back in positive territory for the year and only down about 3.8% from its record close.
Given the renewed risk-taking, it's perhaps no surprise that when it comes to major style factors that have historically driven portfolio returns, momentum is out front this year, and only widened its lead this past month.
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).
As of the end of May, the SPDR S&P 500 ETF Trust SPY.P is up about 0.6% year-to-date (YTD).
Here is a graphic showing the YTD factor percentage changes as well as how they have performed vs the SPY (factor/SPY ratio change):
After a strong May, momentum MTUM.K is out front with a 11.9% advance so far this year.
The momentum ETF's recent run has been underpinned by a further resurgence in tech .SPLRCT. Indeed, as of the end of April, tech accounted for more than a third of the MTUM's exposure. And with a 10.8% advance in May, tech was the best performing S&P 500 index sector for the month.
Low volatility SPLV.K, which is defensive and seen as an attractive alternative for risk adverse investors, is in second place with a 5% YTD advance. About half of the SPLV's exposure at the end of April was in utilities .SPLRCU, industrials .SPLRCI, and consumer non-cyclicals. Industrials, utilities, and staples .SPLRCS are the top three performing S&P 500 sectors YTD.
Growth SPYG.P, up 2% YTD, and dividends NOBL.K up 0.8%, are next in line, and slightly outpacing the SPDR S&P 500 this year.
Large caps SCHX.K, up 0.5% in 2025, are roughly in-line with the SPY.
Quality QUAL.K and value SPYV.P with YTD losses of -0.6% and -0.9% are in negative territory and slightly underperforming the SPY.
Mid caps IJH.P are down -3.6% so far this year, and small caps IWM.P are the glue. With a -7.2% YTD loss, the IWM is the biggest laggard.
Approaching the halfway mark into the 2025 race, traders will be keeping a close eye on all these factors as they continue to jockey for position throughout the year.
(Terence Gabriel)
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EARLIER ON LIVE MARKETS:
EUROPE'S 'BIG 5' LUXURY BRANDS MAY LOSE MARKET SHARE AGAIN IN 2025-MS CLICK HERE
ALL EUROPEAN SECTORS UP IN MAY, BUT CYCLICALS OUTSHONE DEFENSIVES CLICK HERE
WEAK START FOR THE STOXX; DEFENCE, ENERGY UP CLICK HERE
BEFORE THE BELL: MORE TRADE UNCERTAINTY, POLISH VOTE CLICK HERE
TARIFF PLOT TWISTS LOSE THEIR BITE CLICK HERE
2025StyleFactorReturns06022025 https://tmsnrt.rs/4knfL17
(Terence Gabriel is a Reuters market analyst. The views expressed are his own)
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