Why SPMO Stands Out in a Strong Momentum Year
Momentum has emerged as one of the strongest-performing equity factors this year. As investors continue rewarding companies with sustained relative strength despite persistent macroeconomic uncertainty, ETFs such as the Invesco S&P 500 Momentum ETF (SPMO) are drawing investors’ attention.
Key Takeaways
- Persistent uncertainty around inflation, interest rates, valuations, and earnings is driving greater interest in factor-based investing.
- Momentum has been one of the best-performing equity factors this year as leadership has expanded beyond a handful of mega-cap technology stocks.
- The Invesco S&P 500 Momentum ETF (SPMO) has pulled in nearly $3.59 billion in net inflows over the past three months.
How Momentum Investing Follows Market Leadership
Momentum investing isn’t about predicting the next winner. It’s about identifying companies that are already outperforming their peers and have the characteristics to sustain that performance.
That’s become especially relevant this year. While the AI theme continues to drive markets, leadership has broadened into areas such as industrials, financials, and cyclical sectors. As a result, investors are rewarding stocks with strong relative performance.
For example, SPMO has attracted significant investor interest, gathering approximately $1.02 billion in net inflows over the past month and $3.59 billion over the past three months.
See More: Mind the Momentum ETFs: SPMO, MTUM Having Strong Month
How SPMO Works
SPMO tracks the S&P 500 Momentum Index, which selects and weights stocks based on their risk-adjusted price momentum rather than market capitalization.
Unlike broader momentum strategies that draw from large- and midcap stocks, SPMO focuses exclusively on S&P 500 companies and weights holdings according to their momentum characteristics rather than their size. That means that when a small group of companies drives market returns, SPMO can capture more exposure to those leaders. This has helped the ETF during periods where leadership has been concentrated among high-performing technology and growth companies.
SPMO vs. MTUM vs. Broader S&P 500
According to YCharts data, SPMO has slightly outperformed the iShares MSCI USA Momentum Factor ETF (MTUM) over the past 12 months. SPMO has delivered a 26.89% return compared with 26.18% for MTUM. Compared with the broader S&P 500, momentum has also delivered a stronger result. The S&P 500 Total Return Index (SPXTR), which tracks the performance of the S&P 500 including reinvested dividends, returned 17.43% over the same period.
The difference highlights how momentum strategies can vary depending on their underlying index methodology and portfolio construction.
While both ETFs seek to capture companies with strong price performance, SPMO focuses exclusively on S&P 500 companies and weights holdings based on momentum characteristics. MTUM uses a broader large- and midcap universe and follows a risk-adjusted momentum approach. These differences in holdings, concentration, and sector exposure can lead to varying performance outcomes.
Why Semiannual Rebalancing Sets SPMO Apart
SPMO’s recent edge has been supported by its higher exposure to some of the market’s strongest-performing companies.
Since the index is rebalanced semiannually, the rebalance refreshes the portfolio as market leadership evolves. This helps maintain exposure to stocks with persistent momentum characteristics.
By following a transparent index methodology, the strategy also reduces emotional decision-making and helps investors systematically capture changing market leadership.
SPMO carries an expense ratio of 0.13%.
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Invesco Distributors, Inc. is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Invesco Distributors, Inc., nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles.
