The exceptional factor for 2024 is momentum. There are many ways to calculate this factor, but a simple equity benchmark is from S&P which has a broad suite of equity factors. The momentum factor is up 48% through the first eleven months of the year and is more than 50% higher than any other year and any other factor. Strong momentum factor performance does not mean a reversal in the next year, but the size of this move is extraordinary. Of course, the driver a just a few stocks which means that is not likely that this can continue if these key stocks have any slowdown or reversal. The high momentum winners may see a reversal after the one-year mark, but the follow-through on these names which have lasted for more than a year suggests that it is not a given that there will be a January effect.
Realize that factor extremes can happen but does not suggest that there will be continuity. The rebalancing of names can support factor returns but looking at distribution properties leads to caution in holding the momentum factor.
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