WEEKLY BRIEF | When Momentum Reverses

Hello, and welcome to the IVA Weekly Brief for Wednesday, July 22.

There are no changes recommended for any of our Portfolios.

Momentum has turned in the stock market.

Look no further than U.S. Momentum Factor ETF (VFMO). The factor ETF, which holds the stocks that performed best over the past 6 and 12 months, gained a whopping 45.6% between the end of June 2025 and June 2026—roughly double Total Stock Market Index's (VTSAX) 23.1% gain over that stretch. In July, the tables turned: the momentum ETF is Vanguard's worst-performing fund, down 6.0%.

The three PRIMECAP-run funds rode a similar wave up and down —gains of 55.9% to 62.4% over the same 12 months, followed by July declines of 5.5% to 6.0%. That's a coincidence worth flagging, not a verdict on the managers. I'll dig into what's actually driving it—including their long-held stake in Micron—once June 30 holdings data is out.

The lesson for investors: leadership rotates, and stocks (or strategies) that rally 45%–60% in a year are, almost by definition, setting up for a sharp correction. But knowing that doesn't tell you when to get out—or when to get back in.

I didn't trim my PRIMECAP-run holdings ahead of July's pullback, and I'm not selling now either. Trying to time both the rally and the correction is a losing game. Staying invested through the ups and downs is the more reliable path.

Early Education

Last week, Vanguard launched My Classroom Investor—a free curriculum designed to teach students in grades 9–12 about investing. It complements My Classroom Economy, Vanguard’s existing program for grades 3–8.

I haven’t used either tool—I’m not a student or an educator (at least not in a classroom)—but I support the spirit behind them. Financial literacy is a life skill that belongs in the classroom.

Long-time IVA readers know I’m a big believer in jumpstarting a young person’s investment journey. The earlier you get started, the better: I set up a three-jar “spend, save and share” system with my five-year-old this summer. 

It’s also smart “marketing” on Vanguard’s part—putting the brand in front of the next (next?) generation of savers and investors.

Our Portfolios

Four of the five IVA Portfolios are showing double-digit returns for the year through Tuesday. The Aggressive Portfolio is up 13.7%, the Aggressive ETF Portfolio is up 10.8%, the Growth and Moderate Portfolios are up 12.1% the Conservative Portfolio is up 7.2%.

This compares to a 10.9% gain for Total Stock Market Index (VTSAX), a 12.5% return for Total International Stock Index (VTIAX), and a 0.2% drop for Total Bond Market Index (VBTLX). Vanguard’s most aggressive multi-index fund, Target Retirement 2070 (VSNVX), is up 10.5% for the year, and its most conservative, LifeStrategy 20/80 (VASIX), is up 2.3%.

IVA Research

Yesterday, I ran the numbers on Trump accounts—what the government's seed money could actually grow into by the time a child retires.

Until my next IVA Weekly Brief, have a safe, sound and prosperous investment future.