For the better part of a decade, two of the most reliable signals in the "quant" toolkit moved in lockstep. "Price momentum" (buying winners) and "analyst sentiment" (buying stocks where analysts are upgrading forecasts) were effectively two ways of measuring the same thing. If a stock’s price was rising, the fundamentals usually justified it.
That relationship has broken down. In the jargon of the industry, we are seeing a "factor divergence". In plain English, it means the market's trend followers have become detached from the market's fundamental analysts. Over the past year, price momentum in developed markets has returned 19.2%, compared to just 3.9% for analyst sentiment.
Investors relying on price momentum may be taking a bigger industry bet than they realise as "momentum" has moved from being a diversified style bet to a concentrated industry bet. A strategy designed to follow broad market trends is now heavily tethered to the fate of the AI sector.
Unprecedented divide
The catalyst for this split is the widening gap between AI's perceived winners and losers – chips versus data centres, software versus agentic AI, China versus US…
Price momentum strategies, which simply chase the strongest trends, have naturally gravitated toward the winning side of this divide. By contrast, analyst sentiment models – which look for the best-performing companies within each sector – have not picked up this massive industry-level shift.
Over the last 12 months, this has created a 15.3-percentage-point gap between price and sentiment.
In January 2026 alone, price momentum gained 5.1%; while analyst sentiment momentum fell 0.6%. The correlation between the two has collapsed from a reliable 0.86 to just 0.33, a level without precedent in our data.
Figure 1. A decade of correlation is now broken
Source: Man Numeric calculations as at 12 February 2026. Rolling 12-month returns for price momentum and analyst sentiment momentum, global. The two tracked closely for a decade before diverging sharply from early 2025.
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It’s an industry story
This split is driven by industry concentration. When we strip out within-sector industry tilts, nearly half of price momentum’s recent return disappears, 8.9 percentage points of the 20% total.
Stocks with strong price trends are clustering heavily in AI and technology, creating a "wedge" between price and sentiment that is almost entirely explained by these industry effects.
Figure 2. Rolling 12-month industry contribution to price momentum
Source: Man Numeric calculations as at 31 December 2025.
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A tale of two markets
This divergence is almost exclusively a developed market phenomenon. In the US and Europe, the AI-driven rally has acted as a singular, powerful engine, propelling price momentum to all-time highs.
Emerging markets tell a different story. There, price momentum has had to contend with a series of fragmented headwinds such as shifts in US tariff policy and economic news out of China to political developments in Korea.
Why this matters now
The rolling 12-month industry contribution to price momentum currently stands at 7.9 percentage points. This is an all-time high, far outside any historical precedent. The current reading sits at the 100th percentile of our 11-year sample, well beyond the usual boundaries of market noise.
The practical implication is that investors with significant price momentum exposure may be inadvertently running a concentrated industry bet on a scale they have not seen before. This is not necessarily a bad thing – the industries driving the trend may well continue to outperform. But it is a bet that should be taken deliberately, not by accident.
History suggests that divergences of this magnitude tend to narrow. Prior episodes where the gap between the two signals widened significantly saw it revert toward zero within six months. Whether that pattern holds this time depends on how long the current industry concentration persists. If the AI and technology theme continues to drive developed market equities, price momentum will keep benefiting. If it fades, the unwind could be sharp.
Basically, know which flavour of momentum you own. The industry bet embedded in price momentum today is historically extreme. Whether you lean into it or hedge it, it should be a conscious choice.
All data sourced from Numeric’s proprietary factor databases.
Authors: Valerie Xiang, Portfolio Manager at Man Numeric, Ziang Fang, Senior Portfolio Manager at Man Numeric and Nathan Smith, Rotational Analyst at Man Numeric.
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