23. A Stock Competition. The US vs the World vs Momentum: The Winner is?

Several readers of this blog don’t have time for the daily trading required by my SPYnoon strategy and so prefer buy-and-hold SPY. And Yes that strategy has exceeded mine -although with higher risk. However, if one prefers buy-and-hold consider the strategy outlined here.
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The central theme of this blog series has been momentum: GDP weighted momentum to trade SPY at noon (Most Posts) or self-momentum with ETF bonds (Posts 20-22). Momentum is more and more accepted. Fama and French called it the premier anomaly and French even publishes momentum returns (These are for long-short portfolios and so different from long-only ETFs.)  To capitalize on this strategy Blackrock issued an ETF in 2013, ticker MTUM, which buys US stocks exhibiting momentum. It now has 10 billion dollars in assets. Unsurprisingly some of its largest holding are Amazon, Microsoft, VISA, Boeing, MasterCard and Netflix all of which are touching new highs.

How has it performed since its inception in 2013? The answer needs to consider that SPY returns have dramatically outperformed the world since then. In fact it's possibly the largest 5 year outperformance of the US stocks since World War II. Rows 1-4 below show SPY's return of 99.8% trouncing developed Europe (35.4%), Japan (38.1%), and emerging markets including China (23.8%). But row 5 then shows MTUM trouncing even SPY by 144.% to 99.8%. It’s 5-year return has been stunning. Moreover, the last 5 rows show victory wasn’t concentrated in one year;  MTUM beat SPY in each of the 5 years .

During these years market drops have been short-lived and small. Between Jul 15, 2015 and Sept 1, 2015 SPY dropped -9.0% and MTUM -7.9%. This year between Jan 26 and Feb8 SPY dropped -10.4% and MTUM -10.5%. So during drops momentum equaled or outperformed SPY although it's important to note this limited data isn't significant.

With the market having only a few small drops during these 5 years we can’t answer a crucial question: Do momentum stocks drop more than other stocks in falling markets? with any certainty. In rising markets, however, momentum performance has been compelling so for an investment with one side historically beating SPY consider a momentum based ETF such as MTUM.