The Resurgence of Momentum (MMT): A Strategic Play for 2026?

The resurgence of momentum investing has captured the attention of global markets, driven by a confluence of macroeconomic shifts, technological innovation, and institutional reallocation. As we approach 2026, the question looms: Is momentum a strategic play for the year ahead? To answer this, we must dissect the interplay of market catalysts and institutional buying patterns that are reshaping the investment landscape.

Momentum's 2025 Performance: A Foundation for 2026

The momentum factor has demonstrated robust performance in 2025, particularly in Q3, where it outperformed across global markets. In U.S. equities, high-momentum stocks rebounded in September, outperforming the broader market by 113 basis points, with Tesla and NVIDIA contributing significantly to this trend. This outperformance was bolstered by the Federal Reserve's 25-basis-point rate cut and optimistic AI-related earnings, which reinforced confidence in high-beta growth names. Globally, momentum was complemented by value stocks in sectors like healthcare and financial services, suggesting a diversification of drivers.

However, the sustainability of this momentum into 2026 hinges on macroeconomic clarity. Central banks remain pivotal: U.S. inflation and policy decisions under a new administration could introduce volatility, while AI-driven growth narratives may justify elevated valuations, such as the S&P 500's forward P/E of 23.

Institutional Adoption: Systematic Strategies and Digital Assets

Institutional adoption of systematic investing has accelerated in 2025, fueled by regulatory clarity and technological advancements. The passage of the GENIUS Act in July 2025 and the approval of U.S. spot Bitcoin ETFs have legitimized digital assets as a serious investment class. Institutions like BlackRock and Fidelity have capitalized on this shift, with BlackRock's iShares Bitcoin Trust ETF amassing over $50 billion in assets.

Structural changes in crypto markets-such as institutional buyers outpacing Bitcoin's daily issuance and the use of crypto collateral in derivatives-have reduced volatility and extended market cycles. These developments signal a transition from retail-driven speculation to institution-led accumulation, with implications for Bitcoin's price trajectory. By 2026, institutions are projected to allocate 2–5% of portfolios to digital assets, unlocking $3–4 trillion in demand.

2026 Catalysts: Regulatory, Macroeconomic, and Technological Shifts

The 2026 outlook is shaped by three key catalysts:
1. Regulatory Evolution: Emerging markets are witnessing reforms that enhance access to private markets and semi-liquid funds, with 65% of institutions favoring active management to navigate uncertainty. In the U.S., the integration of tokenized assets and stablecoins into traditional financial systems-led by institutions like BlackRock-signals a broader acceptance of digital infrastructure.
2. Macroeconomic Uncertainty: A Natixis survey reveals that 74% of institutions anticipate a market correction in 2026, with 49% expecting a 10%–20% downturn. This has spurred a shift toward alternative assets, with 65% favoring a 60:20:20 portfolio (including private equity, infrastructure, and crypto) over the traditional 60:40 mix.
3. Technological Innovation: Beyond AI, agentic AI, quantum computing, and asset tokenization are reshaping institutional strategies. Agentic AI automates complex workflows, while quantum computing enhances risk analysis. Tokenization, now a $25 billion market, offers instant settlement and reduced intermediation costs, making it a compelling option for institutional buyers.

Strategic Implications for 2026

The resurgence of momentum in 2026 depends on its alignment with these catalysts. For momentum strategies to thrive, they must adapt to a landscape where:
- Active Management Dominates: 62% of institutions prefer active strategies over passive ones, emphasizing selectivity in a fragmented market.
- Geographic Rebalancing Occurs: Institutions are reducing U.S. equity allocations while increasing exposure to Asia-Pacific and European markets, reflecting a search for value and diversification.
- Technology Integration Deepens: Agentic AI and quantum computing will optimize portfolio construction, while tokenization and stablecoins enhance liquidity and accessibility. These developments will shape institutional strategies.

Conclusion

The resurgence of momentum in 2026 is not a given but a possibility contingent on navigating macroeconomic headwinds and leveraging technological and regulatory tailwinds. Institutions that prioritize active management, diversify into alternatives, and integrate emerging technologies will be best positioned to capitalize on momentum's potential. However, the path forward remains fraught with uncertainty-geopolitical tensions, policy shifts, and market corrections could disrupt even the most well-structured strategies. In this environment, agility and foresight will be the defining traits of successful investors.