U.S. equity index futures red: Nasdaq 100 down ~1%
Euro STOXX 600 index edges up ~0.1%
Dollar down; bitcoin off ~1.5%; crude off >2%; gold up >2%
US 10-Year Treasury yield edges down to ~4.32%
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MOMENTUM MAKES A MOVE
When it comes to major style factors that have historically driven portfolio returns, momentum is now leading the pack this year.
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).
In the early days of May, the SPDR S&P 500 ETF Trust SPY.P is down 3.3% 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):
Despite uncertainties surrounding tariffs and interest rates, momentum MTUM.K is now out front with a 4.6% advance so far this year (+7.1% QTD).
The momentum ETF's recent spurt has been underpinned by a resurgence in tech .SPLRCT and Mag 7 .MAG stocks so far this quarter. Indeed, as of the end of March, tech accounted for more than a third of the MTUM's exposure. Tech, with a 5.1% advance since the end of March, is the best performing S&P 500 index .SPX sector so far this quarter.
Low volatility SPLV.K, which is defensive and seen as an attractive alternative for risk adverse investors, has fallen into second place. It's now up 4.1% YTD. Around a third of the SPLV's exposure at the end of March was in utilities and consumer non-cyclicals. Staples .SPLRCS and utilities .SPLRCU are both up more than 5% YTD and are the top performing S&P 500 sectors.
Dividends NOBL.K off 0.7%, and value SPYV.K down 2.7%, are both negative, but are outpacing the SPDR S&P 500.
Quality QUAL.K and large caps SCHX.K are down 3.3% and 3.4% respectively, putting them neck-and-neck with the SPY.
Growth SPYG.K is off 3.9% YTD
Bringing up the rear, mid caps IJH.P are down 5.9% so far this year, and small caps IWM.P are the glue. With a 9.3% YTD loss, the IWM is the biggest laggard.
It's only a little over a third of the way into the 2025 race, but 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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MONDAY'S EARLIER LIVE MARKETS POSTS:
WHAT TO EXPECT FROM GERMANY'S NEW CHANCELLOR CLICK HERE
GRAPPLING WITH "DISTORTED AND CONFUSED" MACRO SIGNALS CLICK HERE
EARNINGS MISSES PUNISHED BY MOST IN 20 YEARS CLICK HERE
EUROPEAN SHARES MIXED, ENERGY LAGS CLICK HERE
EUROPE BEFORE THE BELL: FUTURES NUDGING HIGHER CLICK HERE
TAIWAN DOLLAR LEAPS; BUFFETT TO STEP DOWN CLICK HERE
YTDFactorReturns05052025 https://tmsnrt.rs/4iNia3g
(Terence Gabriel is a Reuters market analyst. The views expressed are his own)
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