Momentum

Last week's Medium-term Momentum return was

This past Monday's Weekly Factor Returns blog mentioned that our Medium-term momentum (MTM) factor generated an +8.67% return within our small cap universe. It was greater than three standard deviations above the average weekly return.

Source: S&P Global | JCIA

Out of the 1,284 weeks since the beginning of 2000, there have been only four weeks where the MTM was spread was more positive. Those weeks were:

• 2008 Nov 14: +12.2%

• 2001 Sep 28: +10.1%

• 2020 May 15: +9.8%

• 2000 April 21: +8.9%

The chart below shows those weeks, and others, along with the cumulative decile 1 minus decile 10 MTM return since 2000. The green, and darker green, dots indicate a week with a two or three standard deviation return above average. The red, and darker red, indicate two or three negative standard deviation return.

The week ending August 9th was the first time since November 2022 where there was a MTM spread that was +/- two standard deviations from average. During 2022, there were ten weeks (six negative) with a MTM spread at least two standard deviations from average.

Prior to 2022, there were 16 weeks between September 2019 and November 2020 with weekly MTM returns equal to or greater than two standard deviations. Four of those episodes occurred during each week in June. June 2020 also experienced the largest one week MTM decline (-21.3%) in our data history, followed by three straight weeks of 7%+ returns.

We can further see other periods where extreme MTM returns occur. They are typically around broader market gyrations - 2000 to 2002, 2008-9, and the 2020 & 2022 periods mentioned above.

These types of events often come in waves. Was last week the start of more large MTM moves or just an isolated incident? We'll see in the coming weeks.