Ben Carlson, Columnist

Momentum Investing Has a Place in Portfolios

Rising prices tend to attract buyers while falling prices tend to attract sellers.

October 24, 2017 at 10:00 AM UTC

Ben Carlson is director of institutional asset management at Ritholtz Wealth Management. He is the author of "Organizational Alpha: How to Add Value in Institutional Asset Management."

Sir Isaac Newton got caught up in the South Sea Bubble.
Source: Hulton Archive/Getty Images

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The S&P 500 has reached almost 50 all-time highs in 2017. Since the start of September alone there have been almost 20 such peaks, which is more than the total number in the entire decade of the 2000s.

The data in the table show that new highs tend to cluster and that there were decades that had very few of them. There are many potential reasons for these numbers, but the simplest answer is the concept of momentum. Sir Isaac Newton’s1508792060347 first law of motion stated that an object at rest stays at rest while an object in motion stays in motion unless acted upon. The corollary to the markets is that rising prices tend to attract buyers while falling prices tend to attract sellers.