The S&P 500’s momentum strategy has beaten the market for a decade by doing one thing: buying whatever is already winning.
In July, that same strategy handed it the worst month in its history.
The Invesco S&P 500 Momentum ETF (NYSE:SPMO) has fallen 10.54% so far in July, putting it on pace for its steepest monthly decline since the fund launched in October 2015.
Over that same decade, the ETF is still up more than 470% from inception, a run that turned a niche factor bet into a $20.93 billion fund.
Momentum investing is simple to describe. A fund like SPMO screens the S&P 500 for the stocks with the strongest recent price gains, then buys the biggest winners and lets them run, rebalancing as leadership shifts.
That approach works until the winners turn. This month the biggest winners turned hard.
One Stock Did More Than A Quarter Of The Damage
Micron Technology Inc. (NASDAQ:MU) had grown into the single largest position in the fund at 9.80% of assets, an unusually concentrated bet for a diversified factor ETF.
In July, the memory-chip maker fell 25%.
That one holding subtracted about 250 basis points from the ETF, roughly 2.5 percentage points of the 10.54% drop.
Micron did not fall alone. The entire memory and storage complex sold off together.
Sandisk Corp. (NASDAQ:SNDK) dropped 36.33% and cost the fund another 106 basis points.
Western Digital Corp. (NASDAQ:WDC) fell 34.68% and Seagate Technology Holdings PLC (NASDAQ:STX) fell 24.97%, while the chip-equipment names Lam Research Corp. (NASDAQ:LRCX) and Intel Corp. (NASDAQ:INTC) each fell more than 21%.
Together, Micron and SanDisk explain more than a third of the entire monthly loss.
Add Western Digital and Seagate and the four memory and storage names account for close to half of it.
The momentum strength was its vulnerability.
Does the Momentum Selloff Offer A Rare Opportunity?
A monthly decline this deep in momentum is rare.
Since SPMO began trading in 2015, the fund has closed a month down 8% or more only six other times. July 2026’s reading is already the largest of them all.
What happened after those six prior signals is why this matters. The fund was higher one month later every single time, with an average gain of 7.37%. Three months out, it was higher in five of six instances.
Six and twelve months later it was higher in all six, up an average of 16.91% and 22.62%.
The clearest case came in March 2020. SPMO had just cratered as the pandemic hit. A month later it had gained 18.66%, and a year on it was up 55.13%.
The signal is not flawless. After the April 2022 drop, the fund was essentially flat a year later, up just 0.32%, and the June 2022 signal was still down 3.09% three months on, pressured by the Fed’s aggressive rate-hike cycle.
But in a decade, no plunge of this kind has left a patient buyer underwater a full year later.
| Date | SPMO ETF Move % | Forward +1M (%) | +3M (%) | +6M (%) | 12M (%) |
|---|---|---|---|---|---|
| October 2018 | -9.81 | +1.59 | +0.79 | +8.54 | +10.72 |
| December 2018 | -9.10 | +13.45 | +17.54 | +19.71 | +27.87 |
| February 2020 | -8.29 | +1.08 | +10.31 | +28.85 | +33.94 |
| March 2020 | -9.03 | +18.66 | +30.55 | +32.83 | +55.13 |
| April 2022 | -8.53 | +1.56 | +0.15 | +2.16 | +0.32 |
| June 2022 | -8.61 | +7.91 | -3.09 | +9.38 | +7.76 |
| July 2026 | -10.54 | — | — | — | — |
| AVG | — | +7.37 | +9.38 | +16.91 | +22.62 |
| MEDIAN | — | +4.75 | +5.55 | +14.55 | +19.30 |
| WIN % | — | 100 | 83.33 | 100 | 100 |
Photo: Shutterstock
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