Investing.com — In line with analysts at Piper Sandler, 2024 is shaping as much as be “one of the best years for momentum strategies in over a decade.”
Regardless of issues round excessive valuations and crowding, they argue that the momentum commerce will doubtless proceed to thrive till “we see a broader improvement in the earnings picture across equities.”
Whereas combination earnings have remained resilient, Piper Sandler factors to a “bifurcation of EPS momentum” inside the index, with mid- and small-cap earnings estimates persevering with to fade.
The analysts spotlight that momentum is being pushed by high quality components like profitability, noting, “Momentum strategies are the top performing strategy across each of the size and style indices on a sector-neutral basis.”
Piper Sandler additionally addresses the intersection of momentum with high quality shares. They emphasize that high quality methods, that are presently fueling the momentum commerce, are inclined to carry out nicely throughout financial comfortable landings.
“People may be surprised to see that quality actually has consistently outperformed in all four soft landing episodes,” the analysts wrote.
In distinction, the report explains that post-recession recoveries sometimes favor cyclical shares and riskier property, leaving high quality shares behind.
“In recessions, the spring gets tightly coiled for a sharp rebound in risky equities and cyclicals, and thus quality tends to get left behind in post-recession recoveries.”
The report gives a constructive outlook for momentum traders heading into the seasonally sturdy a part of the yr.
Piper Sandler concludes that except there’s a major shift within the earnings panorama, the momentum commerce will stay dominant, particularly given its sturdy basis in high quality components.
The agency believes this implies that, within the occasion of a comfortable touchdown, momentum methods may proceed to outperform, offering a compelling alternative for traders.
