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GROWTH VS MOMENTUM: THE RACE MAY COME DOWN TO THE WIRE

2025 has been a roller-coaster ride for the S&P 500 index .SPX. The benchmark index moved from record highs in mid-February to nearly bear-market lows in early April and most recently, in late October, to fresh record highs. And now, heading into the final month of the year, the SPX has advanced for seven straight months.

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

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 rallied 4.5% into its February 19 then-record close. It then collapsed 19% into its April 8 closing low before surging more than 38% into its October 28 record finish. The benchmark index is now up 16.4% in 2025.

Meanwhile, the SPDR S&P 500 ETF Trust SPY.P is up 16.6% 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).

Growth SPYG.P is out front with a 21.8% advance so far this year. That said, its November Rate of Change (ROC) was negative.

Hot on growth's heels is momentum MTUM.K with a 21.0% YTD advance. Momentum has stumbled recently as well. Its November ROC was the weakest of any factor.

Of note, both momentum and growth had heavy tech .SPLRCT exposure (61% for growth and 47% for momentum) as of the end of October. In November, tech ended a seven-month win streak.

Large caps SCHX.K are up 16.5% YTD, which is roughly flat with the SPY.

After a strong summer run, small caps IWM.P are next in line with a 12.6% YTD gain, though they are still underperforming the SPY.

Quality QUAL.K (+11.2% YTD), value SPYV.P (+11.2%), mid caps IJH.P (+6.5%), dividends NOBL.K (+5.6%), and low volatility SPLV.P (+4.5%) are all positive this year, but are also underperforming the SPY.

Given November instability, which at one point saw the S&P 500 slide as much as 5.4% from its record close, the market definitely took on a more defensive tilt. Not only did growth and momentum suffer setbacks, but low volatility and dividends posted the most positive ROCs for the month.

However, with Nasdaq .IXIC bulls feeling their oats again (in the final week of November, the IXIC scored its biggest weekly gain since May), both growth and momentum may be poised for a run down the stretch. Indeed, as the 2025 race comes to its end, traders will be keeping a close eye on what may prove to be a photo finish.

(Terence Gabriel)

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EARLIER ON LIVE MARKETS:

LUXURY: WELL POSITIONED FOR ACCELERATING GROWTH CLICK HERE

DEFENCE SELLOFF: CITI ADVISES BUYING THE DIP CLICK HERE

MIXED START, DEFENCE STOCKS LAG CLICK HERE

EUROPE BEFORE THE BELL: RISK-OFF AFTER BLUE-RIBBON WEEK CLICK HERE

RATE HIKE PROSPECT ARRESTS YEN DECLINE, FOR NOW CLICK HERE

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