Momentum Trades Rapidly Unwind as Global Selloff Takes Hold

It was one of Wall Street’s hottest trades, but a trifecta of troubles has ushered in one of the steepest drawdowns for momentum stocks in years.

Momentum — a strategy that entails chasing winners and selling losers — had been the best-performing group over the past year among 12 factors tracked by Bloomberg. Last week, it was the worst as the US-Iran war and gloomy jobs data rattled investors already trying to cope with the prospect of AI disruption. An exchange-traded fund tracking global momentum stocks is down more than 2% early Monday, as the rotation out of high-flying stocks deepens.