Global Momentum Stocks Reach Record-Breaking Excess Returns

The MSCI Global Momentum Index has outperformed the MSCI Global Index by 17 percentage points since the end of March,有望创下1991年有数据以来最强的两个月超额收益记录。Despite concerns about a slowdown in economic growth due to the Iran war, the AI craze is bringing the most substantial returns to momentum strategy investors in decades.

This year, the continuous influx of funds into tech stocks has made momentum strategy the strongest performing investment style globally. Investors have chosen to ignore macro-level risk signals, chasing the growing group of winners in the AI track.

The bulls believe that the AI craze can continue to attract funds to the winners in the market. However, some analysts warn about the magnitude of excess returns: investors are becoming increasingly crowded in the same batch of stocks, and if high inflation forces the Federal Reserve to tighten policy, or corporate profits weaken, the market faces the risk of sudden reversal.

Bloomberg quoted Hong Hao, Chief Investment Officer of hedge fund Lotus Asset Management, saying: "The momentum trend will continue for several months, accompanied by significant fluctuations, until the final climax. If inflation expectations continue to rise, the Federal Reserve will have to take unexpected significant contractionary actions, and at that time, momentum trading will suddenly stop."

Jun Bei Liu, co-founder and Chief Portfolio Manager of hedge fund Ten Cap Investment, bluntly stated the risk: "This is dangerous - we are seeing bubbles forming in multiple areas, and the AI-led sectors have obviously forgotten all macro factors." She added that the end of the war might further boost market sentiment in the short term, but a slowdown in the US economy is likely to have a substantial impact on corporate profits within the next six months.

The core logic of this round of momentum trend has become highly dependent on the continuation of the AI narrative. Believers in a bull market believe that the race for computing power and the continuous expansion of corporate AI investment will support the valuation of tech leaders, while pessimists worry that when macroeconomic reality finally appears in the financial data, the vulnerability of crowded trades will be fully exposed.