Growth and Momentum Strategies Remain Durable

By Tom Lydon via

It might be hard to tell by the S&P 500’s lethargic first-quarter performance, but the growth and momentum factors continued excelling to start 2018. As measured by the Russell Top 200 Pure Growth Index, domestic large-cap growth stocks returned 4.66% in the first quarter while the S&P 500 Index Momentum US Dollar Gross Total Return gained 3.39%.

The Dorsey Wright US Sector Momentum Index (DWUSSR) is topping the S&P 500 by approximately 160 basis points on a year-to-date basis as of April 18th, indicating that unique approaches to the momentum factor are bearing fruit this year. Many funds use a prosaic approach to momentum, which includes significant overweights to the technology and consumer discretionary sectors.

At the end of the first quarter, the S&P 500 Momentum Index allocated over 54%2 of its weight to those sectors compared to a 37.92% combined weight in the S&P 500. The Dorsey Wright US Sector Momentum Index had a combined tech/consumer discretionary weight of 31.24% as of April 18th.

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