Morgan Stanley: More on MoMO sell-offs and subsequent equity performance
1. As of yesterday’s close, Momentum has posted a -15.9% move lower from its last peak on September 3 (five trading sessions have passed since).
2. Since 1999, there have been 11 instances where Momentum has moved lower by 15% or more in consecutive trading sessions.
3. On average, the peak-to-trough move took seven trading days = while equity markets could still be in the early days of this rotation by historical measures, SPX has historically rallied in the one month following these more extreme drawdowns in Momentum (+2.4% on average across these 11 instances, compared to the average monthly return of 42bps going back to January 1999).