Since momentum strategies can overweight riskier stocks, the ETF could could underperform during another correction. Since defensive stocks typically do better during volatile conditions, the momentum strategy could load up on conservative picks and miss out on the initial recovery in riskier assets.
Additionally, momentum does not always mean increased volatility. MTUM’s three-year standard deviation of 9.8% is actually slightly below the comparable metric on the S&P 500.
“The MTUM specifically looks attractive as the market bounces off its recent lows, though not in the long term as the broader market environment has shifted fundamentally, said Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management. He cited a broad, fundamental shift in the market environment,” reports CNBC.
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