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IS MOMENTUM COMING UP LAME?

It's been a seesaw battle for the S&P 500 index so far this year. That is, from record highs in mid-February, to nearly bear-market lows in early April, to fresh record highs in late June and into late July.

Given renewed risk-taking, it's perhaps no surprise that when it comes to major style factors that have historically driven portfolio returns, momentum and growth have galloped to the front of the pack.

However, momentum is showing signs of slowing so far this quarter, while growth is making a move.

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).

The S&P 500 index .SPX rallied 4.5% into its February 19 then-record close. It then collapsed 19% into its April 8 closing low before surging more than 28% into late July. The benchmark index is now up 7.6% so far in 2025.

Meanwhile, as of its August 4 close, the SPDR S&P 500 ETF Trust SPY.P is up around 7.7% year-to-date (YTD).

Here is a graphic showing the YTD factor ETF percentage changes as well as how they have performed vs the SPY (factor/SPY ratio change):

Momentum MTUM.K is out front with a 17.1% advance so far this year.

That said, after an April-June surge, its quarter-to-date (QTD) rate of change is just +0.8% (vs +2.2% for the SPY).

Next in line is growth SPYG.P with a 12.2% YTD advance. QTD, growth has gained 3.4%, which is the best rate of change of any of the style factors over this period.

Of note, both of these ETFs had heavy tech .SPLRCT exposure (36% for momentum and 60% for growth) as of the end of June. Indeed, tech's QTD rate of change is +5.2%.

Large caps SCHX.K are up 7.8% YTD, which is roughly flat with the SPY.

Low volatility SPLV.P (+4.5%), quality QUAL.K (+4.1%), value SPYV.P (+3%), dividends NOBL.K (+2.7%), and mid caps IJH.P (+0.9%) are all positive YTD, but are underperforming the SPY.

Small caps IWM.P are the glue. With a 0.6% YTD loss, the IWM is the biggest laggard.

In any event, as the second half of the 2025 race continues to unfold, traders will be keeping a close eye on all these factors as they continue to jockey for position throughout the rest of the year.

(Terence Gabriel)

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EARLIER ON LIVE MARKETS:

PHARMA FACES U.S. PRICING FOG, NOT EARNINGS SHOCK – UBS CLICK HERE

WHEN THE FED CUTS, THE ROOF RISES: BCA BETS BIG ON REAL ESTATE CLICK HERE

TIME TO HEDGE EXPOSURE TO EURO ZONE BANKS: CLICK HERE

TUESDAY'S EARLIER LIVE MARKETS POSTS:

CROWDED TRADES, THIN ICE: KAIROS EYES 5–8% PULLBACK CLICK HERE

STOXX 600 CONTINUES CAUTIOUS REBOUND CLICK HERE

EUROPE BEFORE THE BELL: THE COMEBACK CONTINUES CLICK HERE

BAD NEWS IS GOOD NEWS FOR MARKETS CRAVING FED 'ROCKET FUEL' CLICK HERE

(Terence Gabriel is a Reuters market analyst. The views expressed are his own)