Momentum investing has once again taken center stage in global financial markets, fueled by sweeping macroeconomic changes, rapid technological progress, and shifts in institutional asset allocation. As 2026 approaches, investors are left to ponder: Will momentum strategies remain effective in the coming year? To answer this, it’s essential to analyze the evolving market forces and institutional trends that are shaping the investment environment.
Throughout 2025, momentum strategies delivered impressive results, especially during the third quarter, where they outpaced global benchmarks. In the United States, stocks with strong momentum rebounded notably in September, surpassing the broader market by 113 basis points. Major contributors to this surge included Tesla and NVIDIA, whose performance was buoyed by a Federal Reserve rate cut of 25 basis points and robust earnings from the AI sector. These factors reinforced investor confidence in high-growth, high-beta stocks. Internationally, momentum gains were complemented by value-oriented sectors such as healthcare and financial services, indicating a broader range of drivers behind the trend.
Looking ahead, the durability of momentum strategies into 2026 will depend heavily on the macroeconomic landscape. Central banks, particularly in the U.S., will play a crucial role, as inflation trends and policy decisions under new leadership could introduce fresh volatility. Meanwhile, the ongoing narrative around AI-driven growth may help justify higher market valuations, such as the S&P 500’s forward price-to-earnings ratio of 23.
In 2025, institutions accelerated their adoption of systematic investment strategies, spurred by clearer regulations and technological breakthroughs. The enactment of the GENIUS Act in July 2025 and the launch of U.S. spot Bitcoin ETFs have elevated digital assets to a mainstream investment category. Industry giants like BlackRock and Fidelity have seized this opportunity, with BlackRock’s iShares Bitcoin Trust ETF alone accumulating more than $50 billion in assets.
Structural shifts in the cryptocurrency market—such as institutional investors absorbing more Bitcoin than is issued daily and the growing use of crypto as collateral in derivatives—have contributed to lower volatility and longer market cycles. This marks a transition from retail speculation to institutional accumulation, with significant implications for Bitcoin’s price outlook. By 2026, it’s anticipated that institutions will allocate between 2% and 5% of their portfolios to digital assets, potentially unlocking $3–4 trillion in new demand.
The continued success of momentum investing in 2026 will depend on how well strategies adapt to these evolving catalysts:
The revival of momentum investing in 2026 is not guaranteed, but it remains a strong possibility for those able to navigate economic headwinds and harness regulatory and technological advancements. Institutions that emphasize active management, diversify into alternative assets, and embrace cutting-edge technologies will be best positioned to benefit from momentum’s potential. Nevertheless, the path forward is uncertain—geopolitical risks, policy changes, and market corrections could challenge even the most robust strategies. In this climate, adaptability and strategic foresight will be essential for investment success.