Resources/Weekly Insights

Volume 15, Edition 13 | April 27 - May 3, 2026

A Quiet Win for the Momentum Factor

Doug Walters, CFA

Momentum investing is a simple idea backed by some sophisticated academic analytics. The premise is that stocks that have outperformed over the past 6 and 12 months tend to keep outperforming over the near-term.

Contributed by Doug Walters, David Lemire, Max Berkovich, Matthew Johnson

After last week’s deeper look at private credit, I feel the need to cover something a little more uplifting… a piece of our strategy that has quietly been doing exactly what it is supposed to do for our clients in 2026.

Momentum investing is a simple idea backed by some sophisticated academic analytics. The premise is that stocks that have outperformed over the past 6 and 12 months tend to keep outperforming over the near-term. What goes up, will continue to go up. It is one of the most studied and best-documented “factors” in equity markets, and one we have long believed deserves a place alongside more traditional core holdings.

I have found Momentum to be the answer to many client questions. “How are you taking advantage of AI?” Answer… Momentum. But it is also the answer to the questions clients are not asking. That’s because Momentum doesn’t read the Wall Street Journal. It reads the ticker tape (or at least it would if such a thing still existed). And that’s why it will not only pick up some AI winners, it also has the potential to pick up Defense stocks benefiting from wartime spending and Energy stocks capitalizing on higher oil prices.

There are many ways to implement a Momentum position. In our core evidence-based strategies, we typically use exchange-traded funds (ETFs). They automatically rebalance into the trending stocks of the day, and if we ever decide it not to be a good time to own Momentum, they are easy to exit. There’s been no reason to exit them in 2026, and the two we own most prevalently (MTUM and VFMO) are both having an excellent year, outperforming the broader market handily.

Diving into the performance of the funds, what makes 2026’s results particularly interesting is not just what momentum has owned, but just as importantly, what it has not.

This year, the regular rebalancing process of the funds has done something many active managers would be envious of: it has trimmed exposure to several of the mega-cap technology names that have lagged in the new AI era. For example, Microsoft and Apple, long-time staples of growth and momentum portfolios alike, are no longer top holdings, and their shares continue to lag.

In their place, the index has rotated toward the companies whose stocks have actually responded to the AI buildout: semiconductor and semiconductor-equipment names like Broadcom, Nvidia, Micron, and Lam Research, alongside select financials and industrials. The fund still has meaningful technology exposure, but the kind of technology exposure has shifted.

Momentum does not always work (nothing does). It can lag during sharp reversals, and it can be whipsawed in choppy markets. A good example is during the Covid crisis where market leadership shifted back and forth from value to growth at a pace that Momentum could not respond quickly enough. That is precisely why we use momentum as a complement to a broader evidence-based factor strategy.

For now, though, it is worth taking a moment to acknowledge what has been working and why. In a year filled with louder headlines about AI bubbles, private market stress, and tariff uncertainty, a well-researched, rules-based strategy quietly rotated client portfolios in the right direction. We will take that quiet win over a speculative gamble any week.

An object that is at rest will tend to stay at rest. An object that is in motion will tend to stay in motion.
Isaac Newton

Headline of the Week

A Divided Fed Holds the Line

The Federal Reserve did exactly what markets expected at its April meeting: it held rates steady. What markets did not expect was how visibly divided the decision would be. The 8–4 vote marked the highest number of dissents in decades, offering a rare glimpse into a central bank wrestling openly with its own uncertainty.

The disagreement was not about where policy stands today, but about how confidently the Fed should speak about tomorrow. One dissenter argued that softening labor conditions warranted an immediate cut, even with inflation still above target. Others objected not to the rate decision itself, but to language that implied easing ahead without clearer evidence that inflation pressures (especially from energy) are fading. In other words, the debate was less about action and more about signaling.

The meeting also carried institutional significance. It was Jerome Powell’s final one as Chair, closing a tenure defined by consensus-building and careful communication. Yet Powell’s decision to remain on the Board tempers the idea of a clean handoff. Continuity may prove valuable at a moment when inflation, labor markets, and geopolitics (and normal politics) are pulling policy in competing directions. However, it also underscores how difficult those tradeoffs have become.

Markets took the outcome in stride, reflecting that near‑term policy was already priced in. The deeper message, however, was harder to ignore. As leadership transitions, the Fed enters its next chapter with less internal alignment and fewer easy answers, just as clarity matters most.

The Week Ahead

After a packed week, this next one is not as exciting. The Institute of Supply Management (ISM) report, jobs report, and more earnings are what we have to digest.

Job Fair

On Friday, the Non-Farm Payroll report is anticipated to indicate that 73,000 new positions have been added.

It is fair to say that 73,000 on top of the blockbuster 178,000 new jobs in March is a good sign and should help ease the anxiety that the weak number in February created.
A headline unemployment rate of 4.3% will also help!
The Federal Reserve does not have a May meeting, so we will get another look at the employment situation before the Mid-June decision.
Additional monthly employment statistics will be published before the non-farm payroll report, which often leads to tightened expectations.

Service call

The purchasing managers’ Index from ISM on Tuesday is expected to be unchanged.

Last month’s 54 reading for the services report is expected to be the same, which is expansionary.
The prices paid portion may attract more scrutiny; it was at 70.7 in March and is expected to move up to 73 for April, demonstrating the inflation everyone is focused on.

Step down

First quarter earnings season continues, but it will be a lot less exciting without the multi-trillion-dollar companies on the schedule.

Big names include Disney, McDonald’s, Pfizer, Novo-Nordisk, and AMD, but traders are most focused on Palantir.
Palantir, recognized for its AI-driven data analysis tools, has experienced a decline in its stock price during 2026. However, the company is set to announce earnings this quarter that are twice as high as those from the same period last year.

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