Momentum ETF Falls 11% Since Fed's June Rate Signal, Worst Month Since Early 2022

Following the Federal Reserve's June 18 decision to hold rates steady and subsequent signals from new Chairman Kevin Warsh that rate hikes may be more likely, momentum stocks have sharply reversed course. Short-term interest rates rose through June 22, marking the start of a significant momentum factor selloff. Through Tuesday, the iShares MTUM momentum-focused ETF declined more than 11%, meeting the standard definition of a market correction. The fund is now down roughly 8% for the month, its worst monthly performance since early 2022, when the Fed similarly signaled an upcoming tightening cycle. Analysts note that the momentum factor historically struggles during transitions in interest rate regimes, particularly when market expectations shift due to Fed policy changes.
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