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MARKETS DIVERGE, MOMENTUM DOMINATES

June was a bit of a mixed bag for stocks. The S&P 500 .SPX and Nasdaq .IXIC both edged lower, while the Dow .DJI and Russell 2000 .RUT managed to grind out gains. Sector-wise, it was a similar split—tech .SPLRCT and energy .SPNY lagged, but industrials .SPLRCI and financials .SPSY turned in solid performances.

Zoom out to the halfway point of the year, though, and the underlying story hasn’t really changed. Momentum is still the dominant force in this market—and if anything, it’s widened its lead. As a reminder, style “factors” are just different groupings of stocks—like momentum, growth, small caps, quality, and low volatility—that tend to lead or lag depending on the environment.

Even with some geopolitical developments in June, stocks didn’t get much of a lift. The S&P 500 ETF SPY.P finished the month down 1.3%. Momentum, on the other hand, kept charging ahead. The iShares Momentum ETF MTUM.K climbed another 8.6%, pushing its year-to-date gain to 37%—well ahead of SPY’s roughly 9.5% rise.

After momentum, small caps remain firmly in second place. The Russell 2000 ETF IWM.P rose 3.5% and is now up 22% in 2026 (the Russell 2000 Index’s strongest first half since 1991). Mid caps IJH.P have quietly moved into third, with a 3.4% gain bringing their year-to-date advance to 16.6%.

Growth SPYG.P hit a bit of a speed bump in June, falling 2.1%, but it’s still up 11.5% this year. Meanwhile, quality QUAL.K continues to close the gap, now up 10.5% after a solid month. Large caps SCHX.P are tracking fairly closely with the broader market.

There’s also been a noticeable shift away from earlier defensive leaders. Dividend stocks NOBL.K, value SPYV.P, and low-volatility SPLV.P names are now lagging on a relative basis—even after dividends and low volatility posted solid gains in June.

Looking ahead, the big question is whether momentum can keep up this pace. For MTUM to match its first-half run and gain another 37% in the second half, it would end the year up about 88%. For context, its biggest full-year gain since 2013 is about 36%.

If we do start to see turbulence again—whether from interest rates, macro data, geopolitics, positioning, or something else—momentum’s dominance could come under pressure pretty quickly.

(Terence Gabriel)

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