Momentum Summer Slump

The momentum factor has experienced a record 57% run in the first half of 2026 but faces significant short-term risks due to high volatility, crowded positioning, and negative seasonal patterns. Goldman Sachs recommends tactical caution as the trade becomes increasingly concentrated in AI-themed assets.

Key Takeaways

• 1.Negative summer seasonality, market broadening, and extreme factor volatility create short-term downside risk for crowded momentum books.
• 2.Momentum factor exposure remains at extreme levels (92nd percentile 5-year), making the strategy vulnerable to a liquidity-driven summer drawdown.

Table of Contents

• Momentum Summer Slump?
• Overall Prime Book: Net Factor Exposure
• Medium-Term Momentum
• Momentum has become increasingly correlated to the AI trade
• High Flying AI Themes are most concentrated in the long leg of momentum while the short leg is non-secular, non-profitable, or software names
• Breakdown of the High Beta Momentum Pair and Factor Exposure under Barra Medium Term Model
• Sector
• Factor exposure (assuming $100m in the pair)
• High Beta Momentum is off to a record 1H
• Small caps have strongly outperformed large caps YTD
• How is GS US Barra Size Pair seasonality?
• Not all factors trade the same across sectors
• Performance of Momentum Factor (L) relative to Sector Factor Pair Implementations (R)
• New Developments in GS Custom Baskets
• GS US Factor Monitor

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