Although broad domestic equity benchmarks are at or near all-time highs, 2021 has been a difficult year for momentum investors.
The improvement for Small Cap stocks continues to shine when compared to the rest of the market. This trend can last, in some cases, for years.
Relative strength-based investing performs best when there is a high level of dispersion between market leaders and laggards. Since the beginning of this year, this has been the case. Semicondutors, software, waste management and computer technology sectors are leading, while oil related stocks are lagging.
Using relative strength-based investing strategies can lead to significant long term market outperfomance compared to ‘buy and hold’ strategies.