Momentum investing has stopped working. In the first quarter of this year, my no-thought momentum portfolio (which comprises the 20 stocks with a market cap of over £500m which did best in 2020) fell 3.8 per cent, underperforming the FTSE 350 by almost eight percentage points.
Of course, this could be just random noise. But it could be something nastier. Perhaps at the end of last year investors finally wised up to the abundant evidence that momentum investing had beaten the market for years. In doing so they bought momentum stocks, pushing their prices up too far – to levels from which they have since fallen.