Momentum was the only S&P 500 factor index to generate positive returns during the third quarter.
The S&P 500 Momentum gained 2.8% during Q3, while the parent S&P 500 lost 3.3% in the quarter. Momentum is the only S&P 500 factor index to have a positive return above 1% in the past three months. Enhanced value limited losses but remained relatively flat last quarter, gaining just 0.4%.
“The trend was definitely investors’ friend in the third quarter, with stocks that worked in the past continuing to climb higher,” said Todd Rosenbluth, head of research at VettaFi. “SPMO is relatively well-diversified across sectors, with double-digit stakes in four sectors.”
The momentum index is tracked by the Invesco S&P 500 Momentum ETF (SPMO). The fund’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.
Aside from momentum and enhanced value, two other factors beat the S&P 500 last quarter. Quality lost just 0.5% during the quarter, while growth fell 2.6%.
The worst performers during the quarter were low volatility and high beta, which fell 5.8% and 8%, respectively.
All S&P 500 factor indexes fell in September. Losses were indiscriminate across cap sizes and sectors last month. Only energy s aw a positive return, as crude oil prices reached a year-to-date high.
Flows Into SPMO
SPMO has seen only modest flows as the momentum factor outperforms. The $207 million fund has accreted $14 million over a one-month period, and $3 million over three months as of September 30.
SPMO is priced competitively, as the momentum factor ETF charges just 13 basis points.
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