Momentum Shifts Away from Big Tech Leaders

The most recent rebalance of the VettaFi US Enhanced Momentum Index reflected that design in practice. VEMOM underwent a broad refresh, removing several of the prior year’s strongest contributors while reallocating toward new areas of emerging momentum, most notably within healthcare and select financials.

The scope of the rebalance highlights the dynamic nature of momentum indexing. In total, 89 companies were added to VEMOM, while 88 were removed. This level of turnover is consistent with a strategy that continuously reassesses leadership based on recent price performance, rather than long-term fundamentals or sector targets.

Among the most meaningful changes was the complete removal of two large-cap stocks that had previously been significant contributors to index performance. Amazon exited the index at a weight of 6.87%, while Meta Platforms was removed at 6.09%. These changes indicate that, as of the rebalance date, their relative price momentum no longer met VEMOMs inclusion criteria.

One of the clearest outcomes of the rebalance was an increased allocation to large-cap healthcare names, signaling a potential shift in momentum leadership within the broader market. Eli Lilly and Company entered the index with a weight of 6.15%, while Johnson & Johnson and AbbVie were added at 3.43% and 2.69%, respectively. The size of these additions suggests that healthcare had become a meaningful driver of relative price strength at the time of rebalancing.

The rebalance also reflected a more nuanced shift within the financials sector. While payment-focused firms such as Visa and Mastercard were removed, diversified banking institutions gained prominence. JPMorgan Chase recorded the largest weight increase among existing constituents, rising by 1.60% to a total weight of 5.81%. Goldman Sachs and Morgan Stanley also saw notable increases.

Despite several high-profile exits, VEMOM maintained exposure to core technology companies, while modestly trimming weights to manage concentration as new momentum names entered the portfolio. NVIDIA saw its weight reduced by 1.12% to 5.98%, Microsoft declined by 0.52% to 6.22%, and Alphabet was reduced by 1.86%. These adjustments reflect VEMOMs effort to balance existing leadership with emerging trends.

Taken together, the December VEMOM rebalance underscores several defining characteristics of momentum strategies. By removing stocks whose price strength had moderated and reallocating toward areas of stronger recent performance, the index adjusted its composition to reflect current market leadership.

Rather than prioritizing stability or valuation, the process emphasizes responsiveness, helping VEMOM — and, by extension, the ETFs that track VEMOM such as, for example, CI US Enhanced Momentum ETF — continue to evolve alongside changes in relative price momentum. For investors, the rebalance serves as a reminder that momentum strategies are inherently dynamic, with portfolio changes that can be both frequent and substantial as leadership shifts across the market.

Disclaimer:

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