What history tells us about momentum
February 02, 2026
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3 min
ROBERT BIERIG: Let's take a look at how strong momentum has been. The chart on the top shows the returns for a portfolio of all mid and large cap stocks that were in the top quintile of trailing nine month returns. And what we see is that the stocks that had already gone up the most kept going up more than others last year. And if you had just bought those stocks and re-balanced quarterly, you got essentially double the return of the S&P 500 in 2025.
And the chart on the bottom shows a similar phenomenon. But it's extending back for the past two years. And, again, investors who just went out and bought what had already gone up the most kept getting rewarded. So the returns from that simple strategy really trounced the S&P 500's return over both 2024 and 2025.
Now, if you think that sounds too easy to work over a longer time period, you would be right. Before going out and of jumping on the momentum bandwagon, I think it's important to put some historical context around recent results. So the chart on this slide shows the top performing two year periods for momentum since 1998. And, as you would expect, the strongest two years for momentum were the dotcom bubble. But the past two years have been the next highest performing period. And if you add in 2023, it's really the past three years taken together have come very close to the dotcom era.
And, so, I think the message is that we're really in quite rarefied territory today, in terms of how strong momentum has been. And for investors, like us, who, as you know, take profits from the best performing stocks and reinvest in the cheaper ones, it's no fun living through this kind of a period. But the good news is that the periods following strong years for momentum tend to be unusually favorable for Oakmark performance.
