LIVE MARKETS-Momentum holds the lead despite October rotation 

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MOMENTUM HOLDS THE LEAD DESPITE OCTOBER ROTATION

With just three trading days left in October, the SPDR S&P 500 ETF Trust is up less than 1% for the month. Beneath that relatively quiet surface, however, investors appear to have become more cautious, with high-flying momentum stocks losing steam while more defensive areas of the market have regained their footing.

Factors are groups of stocks that share common characteristics, such as momentum, growth, value, quality, small-cap exposure or low volatility. Leadership among these styles often shifts depending on the economic and market environment.

So far in 2026, momentum has been in a league of its own. The iShares Momentum ETF is up 19.7% year to date, comfortably ahead of the SPY's 12.9% gain.

What's striking is how closely grouped most of the other major factors have become.

Small caps IWM.P rank second overall, up 13.8% this year, while growth SPYG.P has gained 13.0%. The SPY and value SPYV.P have each risen 12.9%, followed by large caps SCHX.P at 12.6%, quality at 12.4%, dividends at 11.8% and mid caps IJH.P at 10.8%.

Low volatility SPLV.P remains the clear laggard, up just 5.6% in 2026.

October's leaderboard, however, tells a different story. Momentum's leadership has come under pressure: MTUM is down nearly 6% this month after the CBOE Volatility Index .VIX recently touched four-month highs.

Meanwhile, dividend stocks and low-volatility names have led the way with gains of roughly 8% and 7%, respectively. In fact, NOBL is on track for its strongest month since June 2023, while SPLV is pacing for its best monthly advance since December 2021.

Whether that rotation has staying power remains an open question.

Investors are still navigating geopolitical tensions, elevated oil prices, inflation concerns, Treasury yield volatility, AI spending and debt worries, and the approaching US midterm elections. Factor leadership could continue to shift as markets digest those competing forces. Still, with a lead of nearly 7 percentage points over the broader market, momentum remains the factor to beat.

(Terence Gabriel)

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