Momentum Continues To Dominate Factor ETF Performances

The US stock jumped to another record high yesterday, providing more fuel to keep the momentum factor sizzling. All the major factor strategies are posting solid one-year returns these days, but momentum’s trend remains a bullish outlier, based on a set of proxy ETFs.

The outsized return for the momentum-factor strategy, which targets equities that exhibit relatively strong and persistent performance in recent history, is nothing new. As reported previously (last month, for instance), this slice of the so-called smart beta set has been leading the rest of the field in recent history for the one-year trend.

The iShares Edge MSCI USA Momentum Factor ETF (MTUM) is currently posting a 41.2% total return for the trailing one-year window through yesterday’s close (Jan. 11). The gain is dramatically above the second-strongest one-year performer, currently held by the quality factor via the iShares Edge MSCI USA Quality Factor (QUAL), which is up 25.1% vs. its year-earlier price.

The stock market overall, according to the SPDR S&P 500 (SPY), is ahead by 23.9% on a total-return basis — a strong gain but well below MTUM’s red-hot one-year performance.

The powerful bull run for the momentum factor ETF in recent history is clearly shown in the chart below. One dollar invested in MTUM a year ago would now be worth $1.41. A dollar invested in any one of the other factor ETFs would have increased to a range between $1.13 to $1.25.

For additional research on the factor ETFs cited above, here are links to the summary pages at

iShares Edge MSCI Min Vol USA (USMV) – low-volatility
Vanguard High Dividend Yield ETF (VYM) – high-dividend yields
iShares Edge MSCI USA Quality Factor (QUAL) – so-called quality stocks
iShares Edge MSCI USA Momentum Factor (MTUM) – price momentum
iShares S&P Small-Cap 600 Value (IJS) – small-cap value stocks
iShares S&P Mid-Cap 400 Value (IJJ) – mid-cap value stocks
iShares S&P 500 Value (IVE) – large-cap value stocks
iShares Core S&P Small-Cap – small-cap core

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