Bank of America’s latest analysis indicates that momentum-style equities are receiving strong support from earnings revisions, with upgrades significantly outpacing downgrades. Last week, the global earnings revision ratio for momentum stocks reached 3.14, more than triple the rate of downgrades, according to the bank’s data.
The momentum factor underperformed the MSCI AC World Index by 10.5% in July, alongside declines in risk and growth styles by 13.3% and 7.2%, respectively. Dividend and value styles bucked the trend, posting gains of 4.9% and 4.4% for the month. However, momentum has since rebounded in August, outperforming alongside growth and risk styles as earnings momentum strengthened.
Year-to-date, cyclical global boosters have outperformed defensive equities by 25.9%, reflecting a broader shift toward risk-on sentiment. Bank of America notes that the relative performance gap between boosters and bunkers has exhibited a 72% correlation with the global earnings revision ratio since 1998, underscoring the link between analyst sentiment and market leadership trends.
