Q4 2025 Factor Performance Review: Momentum Crowned Champion
Momentum was the strongest factor in Q4 2025, returning 8.2% as AI-related stocks continued their rally. Quality ranked second at 5.1%, while Value struggled at 1.3%. The quality-momentum barbell strategy outperformed all single-factor approaches.
Momentum crowned champion in Q4 2025, but the real story was Quality's resilience — outperforming during the December sell-off while growth factors gave back gains.
Stoquity AI CommitteeTop Factor
Momentum
Worst Factor
Low Vol
Quality Return
+4.2%
Value Spread
Widening
1Current Market Regime
Regime
Risk-On Momentum (82% confidence)
| Indicator | Value | Signal |
|---|---|---|
| S&P 500 Quarterly Return | +5.8% | bullish |
| Market Breadth (% above 200 DMA) | 62% | neutral |
| Put/Call Ratio | 0.72 | bullish |
| Fund Flows (equity) | +$45B | bullish |
| Margin Debt Growth | +8.2% YoY | cautious |
2Sector Performance
| Sector | Return | Trend | Note |
|---|---|---|---|
| Technology | +8.5% | up | AI mega-caps drove bulk of market return |
| Communication Services | +6.2% | up | Meta and Alphabet advertising strength |
| Industrials | +3.8% | up | Reshoring and infrastructure spending benefits |
| Financials | +3.1% | up | Bank earnings exceeded expectations |
| Healthcare | +1.2% | flat | Mixed — pharma strong, biotech weak |
| Utilities | -1.5% | down | Rate sensitivity weighed on defensive sectors |
| Consumer Staples | -2.1% | down | Volume declines offset pricing gains |
3Factor Performance
| Factor | Return | Rank |
|---|---|---|
| Momentum | +8.2% | #1 |
| Quality | +5.1% | #2 |
| Growth | +4.8% | #3 |
| Profitability | +3.9% | #4 |
| Revenue Growth | +3.5% | #5 |
| Dividend Growth | +1.8% | #6 |
| Value | +1.3% | #7 |
| Low Volatility | -0.8% | #8 |
4Portfolio Impact
Cloud Warriors
+7.5%
Added APP and CRWD
AI Innovators
+9.2%
NVDA and AVGO drove performance
Dividend Aristocrats
+1.1%
Underperformed as defensives lagged
5Outlook
Momentum leadership typically persists for 2-4 quarters before reverting. The current cycle is extended but supported by fundamental earnings acceleration in AI-related names. We recommend maintaining momentum exposure but gradually increasing quality allocation as a hedge against potential reversal.
💡 Did You Know?
The Momentum factor has now outperformed for 6 consecutive quarters — its longest winning streak since 2007. Historical precedent suggests a rotation toward Value is approaching.
See how portfolios adapted
Watch the AI adjust allocations in response to regime changes.
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