Momentum just had its best run since the dot-com bubble: which factor is your portfolio betting on without you knowing?

In the second quarter of 2026, the equity momentum factor gained 44.4%, including a 7.5% jump in June alone — its best multi-year run since the dot-com bubble peak, and the only factor to close positive across all global developed and emerging markets. A US equity momentum ETF (the Vanguard U.S. Momentum Factor ETF) is up 18.5% year-to-date as of September 13. But the number that should give you pause isn’t how much momentum gained — it’s that, according to J.P. Morgan Asset Management, the dispersion within the factor — the gap between momentum’s “winners” and “losers” — is the widest since 1990. Anyone holding a “diversified” portfolio of stocks or broad ETFs still carries an exposure, positive or negative, to this factor. The useful question isn’t whether momentum keeps running. It’s whether you know how much your portfolio is betting on it right now.

What is an investment “factor,” exactly?

A factor is a measurable characteristic of a stock that, historically, explains part of the return difference between stocks — beyond simply “being in the equity market.” The academic reference model, Fama and French’s, isolates a few: smaller companies versus larger ones (size), stocks cheap on fundamentals versus expensive ones (value), more profitable companies versus less profitable ones (profitability), companies that invest conservatively versus those that invest aggressively (investment). Momentum is typically added on top: stocks that have risen the most over recent months tend, on average and for a stretch, to keep outperforming. A factor isn’t a stock or a sector — it’s a statistical tilt that cuts across different stocks and sectors.

”I only own a broad index or a few diversified ETFs” — doesn’t that mean I have no factor exposure?

No. A broad index like the S&P 500 isn’t “factor-neutral” — it’s simply a mix of factors nobody chose on purpose. If the market in a given period rewards companies on a strong run (momentum) or huge, profitable ones (a mix of size and quality), a cap-weighted index automatically inherits that tilt, because the companies that rose the most automatically end up weighing more in the index. The reverse holds too: a handful of hand-picked stocks can end up heavily exposed to momentum, or the opposite, without whoever built the portfolio realizing it. Not owning factors isn’t actually an option — the only real choice is whether your exposure is deliberate or accidental.

Why has momentum run this hard specifically in 2026?

The strongest gains came from Asian and emerging markets central to the AI and semiconductor supply chain, with factor leadership shifting away from software names toward memory-chip makers and AI capex beneficiaries. It’s the same underlying story — market performance concentrating in a narrow group of AI-linked tech names — that is pushing the largest indices’ weight toward fewer and fewer stocks: when a small set of stocks rises much faster than the rest for an extended stretch, the momentum factor and index concentration tend to reinforce each other, because both reward whatever has already gone up.

So should you buy a momentum ETF now?

This article isn’t in a position to tell you that, and you should be wary of anyone who does based on one strong quarter. The widest factor dispersion since 1990 isn’t a technical footnote — J.P. Morgan Asset Management’s own Q3 2026 Factor Views flags that such a wide gap between momentum’s winners and losers raises the risk of a sharp reversal, and suggests trimming an outsized momentum overweight rather than abandoning the factor entirely. Chasing a factor after its best run in over two decades is a different decision than understanding how much exposure to it you already ended up with by accident — and the two get confused easily.

What this article is NOT

This isn’t a recommendation to buy, sell, or rotate into any specific factor, stock, or ETF, nor a forecast of how long the current momentum strength lasts or how and when it reverses. The return and dispersion figures cited above are historical 2026 data points reported by industry sources — they’re here to show that factor exposure is a real, measurable feature of any equity portfolio, not to suggest a view on which factor wins from here. A factor’s past performance, in either direction, doesn’t guarantee its future performance.

How do you find out which factors your own portfolio is actually exposed to?

Not by eyeballing the tickers you hold and guessing — by regressing your portfolio’s actual returns against historical factor return series. That’s exactly what Opthest’s factor exposure analysis does on every tracked portfolio: it takes the portfolio’s real daily returns (weighted by actual positions, not a theoretical model) and regresses them, via OLS, against the Fama-French 3-factor, 5-factor, or momentum-extended model — returning a coefficient (loading) for each factor, with its statistical significance, plus a residual alpha the factors don’t explain. It doesn’t tell you which factor to buy; it shows you which factors your portfolio already carries, often without whoever built it having decided so. Like every Opthest tool, it remains an algorithmic output on historical data — educational/informational content, not personalized financial advice, with no guarantee of future results.

Not owning a broad index doesn’t shield you from factors — it just hides which ones you’re holding. Momentum just had its best quarter in a quarter-century. The question is whether you chose that exposure, or just ended up with it.

Sources: Advisor Perspectives / VettaFi, “S&P Factor Performance Highlights Momentum in June & Q2”; The Motley Fool, “Meet the Magnificent Momentum-Driven ETF Obliterating the S&P 500 in 2026”; J.P. Morgan Asset Management, “Factor Views 3Q 2026”.