Volatility in a basket of U.S. momentum stocks has climbed to an unprecedented level relative to the S&P 500, according to The Kobeissi Letter. On July 19, the market commentary account said the group’s three-week volatility ratio versus the benchmark index had risen to 4x, setting a record high. It added that the ratio has expanded by more than fourfold in recent weeks.
The momentum cohort includes several high-growth technology names tied closely to the AI trade, including Nvidia, Super Micro Computer, Palantir, D-Wave Quantum and CoreWeave. The latest reading stands well above prior stress periods. During the 2020 pandemic market crash, the ratio peaked at around 2x, while during the dot-com bust it topped out near 1.8x.
At the same time, the U.S. Momentum Index has fallen 24% so far in July, a drop that could mark its steepest monthly decline since the 2008 financial crisis. The update points to a sharp reversal in market leadership as some of the market’s strongest performers lose favor.
U.S. momentum stocks have become four times as volatile as the S&P 500 on a three-week basis, The Kobeissi Letter said on July 19, calling the reading a record high.
The ratio has increased by more than fourfold in recent weeks. The group includes high-growth technology stocks at the center of the AI boom, such as Nvidia, Super Micro Computer, Palantir, D-Wave Quantum and CoreWeave.
For comparison, the same ratio peaked at around 2x during the 2020 pandemic market crash and about 1.8x during the dot-com bust. The current level is well above both periods.
At the same time, the U.S. Momentum Index is down 24% since the start of July and could be headed for its largest monthly drop since the 2008 financial crisis. Stocks that had led the market are now rapidly falling out of favor.
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