It’s been a terrific year for the momentum trade. But the leadership of the US equity market could be changing, according to Gui Soria, who oversees US factor products within Goldman Sachs Global Banking & Markets.

Momentum simply captures the idea that the equity market’s most recent winners will continue to outperform the laggards. Thus far this year, AI optimism has driven the tech giants and a few other top performers, while the higher-for-longer rates narrative has consistently pushed down the shares of smaller and less profitable companies.

But at this point, “both of those themes could be turning around,” Soria says. “We’re seeing more skepticism about AI, and rates have been declining as we approach a Fed cutting cycle – so it's no surprise that recently, we've seen momentum beginning to crack.”

So what does it mean for investors?

“If your portfolio has become over-levered to some of those winners, it might be time to rebalance,” Soria says. He adds that this could mean “picking up small caps, or some of the other under-loved names in the market.”