Momentum, Momentum, Momentum

Markets around the globe continue to rise.


Michael Batnick explains momentum:

The S&P 500 closed at an all-time high yesterday for the sixth straight day. The last time this occurred was June 1997. Why is this happening?

Are markets pricing in tax reform? Is it looking forward to higher earnings over the next twelve months? Is it because North Korea hasn’t been in the headlines for a week or two? You can search for all the reasons you want, but the one that matters is this, rising prices attract buyers. In finance, this is called momentum.

Momentum is the subject that has fascinated me for 20 years. What fascinates me most about it as Michael explains later in the post is momentum remains a factor shunned by Wall Street…

I guess it’s hard to sell the idea that rising prices attract buyers and falling prices attract sellers. That narrative just might not be bullshitty enough. People love a good story and perhaps something this simple doesn’t lend itself to that part of our brain.

I do think it’s genius that iShares has created an ETF called Momentum ($MTUM) which is perfectly simple enough for people that want to say just put some momentum in my portfolio.

I wish I had thought of that.

In fact, now that someone has thought of that, prepare to see a lot more of it. Wall Street may shun momentum, but they will not shun iShares $MTUM success.

Also published on Medium.