As horse races go, this one’s not even close. The momentum factor continues to leave the rest of the field in the dust for the major US equity factor strategies, based on the one-year trend via a set of ETFs.
Although all the factor funds are posting solid gains through yesterday’s close (Nov. 8), the gap in favor of momentum is conspicuously wide for trailing one-year total returns.
The iShares Edge MSCI USA Momentum Factor ETF (MTUM) is current posting a red-hot 34.3% advance for the past 12 months through Wednesday. That’s a dramatic lead over the returns for the broad US equity market and other factor ETFs.
The SPDR S&P 500 (SPY), a proxy for US stocks overall, is up 23.5% for the year through Nov. 8. Meantime, the core small-cap factor holds the second-strongest one-year result for the factor ETFs: iShares Core S&P Small-Cap (IJR) is up 25.2% for the trailing one-year period. The softest gain for US equity factor ETFs: large-cap value stocks via iShares S&P 500 Value (IVE), which is posting an 18.4% total return for the one-year change.
Note that MTUM’s upside bias remains strong in terms of recent price action (black line at top of chart below). Meanwhile, the second- and third-strongest factor ETFs for one-year results (small-cap core and small-cap value, respectively) have suffered setbacks recently (grey and green lines). In other words, momentum’s dominance has strengthened significantly in recent weeks in relative terms.
At some point, momentum’s extraordinary bullish tide will fade. For the moment, however, this factor is red hot and the would-be successors to the throne are on the defensive.
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