Momentum has beaten SPX through the first half of January each of the last three years.
Momentum strategies have been off to a great start through the first half of January. The iShares MSCI USA Momentum Factor ETF (MTUM) has outpaced the S&P 500 Index (SPX) by 1.84% through January 16th. In fact, this is the third year in a row that MTUM has outperformed SPX in the first half of January. While the first half of January is a relatively short time frame, it does seem to indicate whether MTUM or SPX will win out the rest of the year. Going back to 1993, the winner of the first half of January went on to outperform on an annual basis nearly 75% of the time. Therefore, a strong start by momentum is usually a positive sign that the rest of the year will be a good one on a relative basis. Over the last decade, the winner of the first two weeks of January went on to have the better year eight out of ten times and has been correct the last four years (2022 – 2025). MTUM has beaten SPX in the first half of January the last three years (2024 – 2026). While basing investment decisions purely on the first two weeks of January would be ill-advised, the historical tendencies point to backing the strong horse even if it is just out of the gate.
Looking elsewhere, momentum stiffened back up after cooling off at the end of 2025. The RS Spread Index (RSSPREAD) tested its positive trend line in December but has since reversed higher and is one box away from marking a new all-time high. For those unfamiliar, RSSPREAD tracks the dispersion between a basket of high momentum stocks versus a basket of low momentum stocks. If the indicator is moving higher, then high momentum stocks are outperforming low momentum stocks, an ideal environment for any momentum or trend following strategy. RSSPREAD has been in a positive trend since early 2024, and despite some rough patches, continued to push higher in 2025.
There is plenty of other positive evidence as well like MTUM having a fund score above 4.0 since January 2024 or the Percent Positive Trend for the S&P 500 (^PTSPX) being above 50%. Until we start to see the evidence change, the domestic equity market is in a supportive environment, especially for momentum and relative strength strategies. With the strong start to the year, it’s usually a good idea to stick with the best horse until proven otherwise.
