Momentum Investing

May 29, 2024 | Market Minute, Market Updates

What is momentum investing, why does it work, and how does investor sentiment about the future play a critical role?

Hello, I’m Daniel Greulich, Chief Investment Officer at GreenUp Wealth Management. Today we’ll explore momentum investing, why it works, and how investor sentiment about the future plays a critical role. Momentum investing is based on the principle that assets which have shown stronger performance recently are likely to continue their streak, while those that haven’t might keep underperforming.

It’s not merely about following the crowd, but about strategically capitalizing on existing market trends and investor expectations about the future. In the latter half of 2023 and early into 2024, we witnessed significant market fluctuations with substantial price movements. The S&P 500 alone returned 11.19 percent and 10.05 percent of those quarters, but it was paired with substantially lower earnings growth. And these phases serve as textbook examples of momentum. Why does this even happen? Well, it’s often because investors are excited about anticipated positive changes in the environment. Be it economic policies, technological innovations, or geopolitical stability, this excitement fuels investments in sectors that are expected to benefit most from those changes, reinforcing their upward trajectory. Embracing momentum doesn’t mean throwing caution to the wind. While it is vital to leverage market trends, it’s equally important to manage risks associated with overheating assets.

At GreenUp we want to avoid the pitfall of selling too late when the market is at a peak by engaging in a disciplined approach of quarterly rebalancing. This strategy ensures that gains are captured and portfolios are not disproportionately tilted towards any particular asset class, thus maintaining alignment with the intended risk profile.

Momentum investing taps into the collective anticipation of future gains, making it a dynamic component of any investment strategy. By understanding and predicting shifts in investor sentiment and future market environments, we can position our portfolios to benefit from these movements. At GreenUp Wealth Management, our goal is to manage momentum and other dynamics thoughtfully, ensuring your investments grow while mitigating risks.


  • Daniel Greulich, CFA, CFP®

    Chief Investment Officer | Wealth Advisor | Ann Arbor, MI -- Daniel leads our Investment Committee and partners with Aaron Kirsch, Chief Client Advocacy Officer to design and implement client portfolios with your advisor. Daniel brings 14 years of practical experience as a trader, financial advisor, and money manager at both large and mid-sized financial services companies to GreenUp Wealth Management. In addition, he holds a CFP® designation and is also a CFA charterholder. This combination of experience and knowledge helps Dan confidently guide his clients through the development, execution and monitoring of their customized financial plans.

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