Momentum stocks are having a moment this year.
The momentum factor in the US is up around 30-40% this year, depending on how you define it.
Buying rising stocks works really well in 2026.
Our research team has compiled a chart of performance for both U.S. and international stocks through the end of June on a variety of factors, including momentum, undervolume, value, quality, shareholder return and growth:
US momentum is ruining everything this year. Momentum is also working in foreign stocks.
Interestingly, foreign stocks outperform U.S. stocks on every factor except momentum.
Momentum as a factor is fairly simple but can be difficult to understand. Will you buy rising stocks? And keep having them until they stop rising.
Sometimes this works very well for a variety of behavioral reasons.
But nothing works all the time.
Look at the same factor returns for 2025:
The 2026 results are nothing like the 2025 results.
Shareholder return last year1Valuable and low-volume stocks abroad have become gangsters.
Growth stocks in the US have outperformed momentum Momentum is destroying growth stocks this year.
It is also surprising that value growth is higher in 2025 and so far in 2026.
I like it a lot asset allocation quilt of returnsThere is no rhyme or reason to account for performance in any given year.
The types of stocks running in any given year may change without warning. Sometimes these factor strategies can persist for long periods of over- and underperformance. Other times they are located at the bottom, top and middle, respectively.
Momentum stocks may continue to lead the way through the rest of this year. Or there could be a momentum crash that would bring these high flyers back to Earth. This is often how it works with momentum-driven stocks.
The trend is your friend until the last corner.
What will happen next year? Who knows!
It’s really hard to know which factors will work well and which will make things difficult.
Selecting winning factors in advance is almost as difficult as selecting winning stocks.
Unless you have a crystal ball to impart the secret to you, you have two options when it comes to dealing with this uncertainty.
You can pick one or two factors and have them come come hell or high water, with the understanding that every investment strategy will come in and out.
Or you can diversify enough to capture enough winners to offset the losers.
It all depends on your level of patience and risk appetite.
As always, investing is all about trade-offs.
Further Reading:
My 2025 Favorite Performance Table is Being Updated
1Shareholder return is a factor of value that looks at companies that pay dividends, buy back shares, and pay down debt.
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