Momentum leads 2026 so far, but October rotation favors defensive stocks
Momentum stocks still top the factor board for 2026, yet dividend and low-volatility names are leading the October gains, Reuters reports.
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what happened
According to Reuters, momentum has been the strongest factor this year, with the iShares Momentum ETF up 19.7% year to date against 12.9% for the SPDR S&P 500 ETF Trust. Small caps sit second at 13.8%, while low volatility lags with a gain of just 5.6%.
October has told a different story. Momentum has slipped nearly 6% for the month as the CBOE Volatility Index hit four-month highs, while dividend and low-volatility stocks gained roughly 8% and 7%. NOBL is on track for its best month since June 2023, and SPLV for its strongest monthly gain since December 2021.
Whether this rotation lasts is unclear. Investors are weighing geopolitical tensions, elevated oil prices, inflation, Treasury yield swings, AI spending, debt concerns and the upcoming US midterm elections.
why it matters
The shift signals a change in investor mood: caution is pushing money toward defensive groups, which narrows momentum's gap with the broader market. For factor watchers, the key question is whether this flow persists, not whether momentum has led for the year.
market impact
Momentum stocks (MTUM): outflows into dividend and low-volatility names weigh on the factor
- Momentum stocks (MTUM) pressure down — investors rotating toward defensive dividend and low-volatility names
tags
instruments
sources
- Momentum holds the lead despite October rotation — Reuters, 28 October 2026 at 13:09 UTC
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