For U.S. stock market investors in particular, one stock play has continually worked for them throughout 2018, the same thing that has been working all along: momentum investing.

Momentum investing, or the concept that stocks that have recently performed well will continue on that track throughout the medium term, has been investors strongest fallback bet for months.  However, out-performance has been so large that this upward momentum could soon be at risk making a drastic downward turn.

Since 2017’s start, the the S&P 500 Momentum Index has outperformed the S&P 500 SPX, +0.36% by 15% on a total-return basis.  This is “a figure that has rarely been exceeded  historically, and when it has been exceeded, have tended to predict a subsequent period of weakness for the strategy”  (Source:  Marketwatch:  “One of 2018’s Most Successful stock plays may be about to turn”)

The last time we saw such excessive returns, on a rolling 18 month basis,  was in the beginning of 2008, as the financial crisis was heating up.  After the high peak their was a plummet that didn’t bottom out until the middle of 2010.

Most gains come from the markets biggest winners, including the FANG tech stocks who have all continued in their longstanding outperformance. Facebook, Netflix, Amazon, Google and Apple have all outperformed the S&P 500 this year.  Even the weakest of the bunch, Alphabet, is up 7.2% in 2018.  While Amazon has jumped 46% and Netflix has more then doubled.

Goldman Sachs data has informed us that these FANG stocks alone have contributed to more then half of the S&P 500’s 2.9% gain in the second quarter.