Momentum Factor Continues Outperformance into September

Compared to its U.S. equity factor peers, momentum is looking very compelling this month.

The S&P 500 Momentum is up 1.6% in September, while the benchmark has lost 1.1% during the month. Momentum is the only S&P 500 factor index to have a positive return month to date.

Aside from momentum, five other factors are beating the S&P 500 in September. The S&P 500 QVM Multi Factor is down just 0.1% during the month, while pure growth, buyback, low volatility, and value have dropped 0.4%, 0.7%, 0.7%, and 0.8%, respectively.

Momentum was the Top Performing Factor in August

The S&P 500 declined 1.6% in August, its second monthly decline year to date. Notably, momentum and quality were the only S&P 500 factor indexes to record gains last month. In August, momentum gained 2.3% while quality climbed 0.2%.

The factors that performed better in August tended to tilt toward quality and growth, while beta and value tilts were at the bottom of August’s league table, according to S&P Dow Jones Indices.

Momentum, one of the lowest-beta factors according to S&P Dow Jones Indices, was rewarded in August as lower beta indexes tended to perform better. The index is tracked by the Invesco S&P 500 Momentum ETF (SPMO).

Year to date as of September 8, SPMO’s underlying index is up 5.7%. Meanwhile, the benchmark is up 14.5%. The top performing factors year to date have been those that have the largest tilt toward the tech sector and growthy mega caps. This includes growth, up 22.5%, and high beta, up 19.3%.

SPMO’s underlying index includes the top 100 stocks in the S&P 500 based on 12-month prior risk-adjusted performance. The index weighting is inversely proportional to the trailing volatility of each component, subject to single stock and sector constraints, according to S&P Dow Jones Indices.

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