When Momentum Crashes

Momentum strategies can suffer sudden, severe losses, usually when markets reverse sharply. Here is when momentum has crashed, what happened in 2022 and in our 2026 data, and how traders manage the risk.

The rebound problem

Momentum crashes usually happen when a falling market suddenly rebounds. The most beaten-down stocks jump the most, while the recent leaders lag. In spring 2009, as markets bounced from their lows, strategies that bet against the prior losers suffered some of the worst losses in the history of momentum research.

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The rest of this lesson, its chart examples and quiz are part of Investing School. Start free with Stock Market Fundamentals and the first lesson in every category.