Investing.com — Based on analysts at Piper Sandler, 2024 is shaping as much as be “the most effective years for momentum methods in over a decade.”
Regardless of considerations round excessive valuations and crowding, they argue that the momentum commerce will probably proceed to thrive till “we see a broader enchancment within the earnings image throughout equities.”
Whereas mixture earnings have remained resilient, Piper Sandler factors to a “bifurcation of EPS momentum” throughout the index, with mid- and small-cap earnings estimates persevering with to fade.
The analysts spotlight that momentum is being pushed by high quality elements like profitability, noting, “Momentum methods are the highest performing technique throughout every of the scale and magnificence indices on a sector-neutral foundation.”
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 properly throughout financial gentle landings.
“Individuals could also be shocked to see that high quality really has persistently outperformed in all 4 gentle touchdown episodes,” the analysts wrote.
In distinction, the report explains that post-recession recoveries usually favor cyclical shares and riskier belongings, leaving high quality shares behind.
“In recessions, the spring will get tightly coiled for a pointy rebound in dangerous equities and cyclicals, and thus high quality tends to get left behind in post-recession recoveries.”
The report presents a optimistic outlook for momentum traders heading into the seasonally robust a part of the 12 months.
Piper Sandler concludes that except there’s a big shift within the earnings panorama, the momentum commerce will stay dominant, particularly given its robust basis in high quality elements.
The agency believes this implies that, within the occasion of a gentle touchdown, momentum methods may proceed to outperform, offering a compelling alternative for traders.
