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 Morningstar.com:
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