ADVERTISEMENT

Momentum Stocks Just Had Their Biggest Plunge Ever

Stock-Leaders ETF Erases Two Months of Winning in Just Five Days

(Bloomberg) -- The higher they climb, the harder they fall.

Wednesday’s market rout included a record 4.5-percent plunge for the $10-billion iShares Edge MSCI USA Momentum Factor exchange-traded fund, which bets that the market’s winners will keep on winning.

Momentum Stocks Just Had Their Biggest Plunge Ever

“It reminded me a little bit of the 2011, 2012 days when the best-performing assets that year got sold during a risk-off,” according to Michael Purves, Weeden & Co.’s chief global strategist, who said the selling seemed “indiscriminate.”

U.S. momentum stocks have erased two months of outperformance during this stretch. The ETF, which goes by the ticker MTUM, is now in oversold territory for the first time since the August 2015 China devaluation aftermath. That’s according to the relative strength index, a gauge of the magnitude and persistence of price movements.

Momentum Stocks Just Had Their Biggest Plunge Ever

Some of the product’s biggest holdings are Amazon.com Inc., Microsoft Corp., Boeing Co., Visa Inc. and Mastercard Inc. The ETF was launched in April 2013.

To contact the reporter on this story: Luke Kawa in New York at lkawa@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Joanna Ossinger, Dave Liedtka

©2018 Bloomberg L.P.