This year’s new college football playoff schedule is certain to bring some exciting games. We’ve already seen several great games during the regular season with the Miami/Cal game standing out as one of them. Trailing badly in the third quarter 35-10, Miami seemed to be on the ropes and heading towards a disappointing loss, but then something happened that has been seen many times in sporting events. Miami scored a touchdown at the end of the third quarter, converting for two additional points and the life it gave the team led to a seemingly unstoppable fourth quarter.
At some point, as Miami took control of the game an announcer commented that winning a sporting event was largely determined by momentum. Football fans have long understood that momentum can be more valuable in a game than the score on the board. In this particular game Miami had definitely moved momentum to its favor as they went on to win in 2024’s biggest college football comeback.
Momentum describes how an object with a significant amount of mass gets moving in a single direction. Like a speeding freight train, something with a lot of momentum is very difficult to stop. A football team that builds momentum can run up points in a hurry as they roll over their opponent.
Momentum can also be a significant factor in investing. Analysts track all kinds of financial statistics, but some of the greatest investors have made their living with an eye on momentum. It is often that unquantifiable factor that you sometimes have to “feel” more than you see. Of course, momentum can and does work both ways. An example would be the market crash of 2008 or the sudden market reaction to Covid in early 2020, where negative momentum pulled the markets far lower than they probably should have gone. Regardless of what the “numbers” tell me at any point in time, I always pay extra attention when I sense momentum in the markets.
As we move closer to the end of the year many investors are talking about how much the market is up this year and whether there is still room to grow. We have seen some very volatile days the past week that may indicate some concerns are rising. There are also many stocks trading at or near all-time highs, so the temptation at year end to take profits off the table may be growing, and perhaps we have seen some of that these past few weeks. These are all legitimate concerns, but let me gently offer a word of caution, with no real reason other than perhaps the “feeling” that seems to be pervading investing circles right now.
Our nation just went through one of the longest, combative presidential campaigns in history. In the end, the magnitude of the results probably surprised even the winners. As a result, we are in a period of significant political momentum. It will be several months before the nation can determine if any positive change is realized but for the time being, that political momentum seems to be swelling and the positive expectations for the stock market that manifested shortly after the election may very well carry through for a couple of months.
There may be many legitimate reasons for feeling the markets have gone too high, and I wouldn’t argue with anyone who wanted to approach 2025 a bit cautiously, but right now interest rates, inflation, employment, and the likelihood of a more favorable regulatory environment, are all moving in a good direction indicating a significant potential for market momentum to continue for a while. I would be careful about betting against it. As all seasoned football fans have learned, momentum can be a powerful thing.
Dan Wyson, CFP® is a long running national financial columnist, author of several books and CEO/Founder of Wyson Financial/Wealth Management 375 E. Riverside Dr. St. George, UT 84790 – 435-986-9525 Securities and Advisory services offered through Commonwealth Financial Network, member FINRA/SIPC, a registered investment advisor.
