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Short-term momentum is close to zero in nearly every asset class outside of the commodity space. We think this reflects the general mood of the market as we enter the seasonally weak period for stocks and other risky assets. The S&P 500 failed to achieve a new high in the past week which appears to support a more defensive posture as we go into September.
Momentum measures the rate of acceleration, either positive or negative, in a security’s price and may indicate which markets are positioned for gains or losses. Investing based on momentum entails establishing long positions in securities with positive recent returns and short positions in those with negative recent returns. Momentum in asset classes may illustrate the development of trends in the market.