European Equity Strategy: Momentum unwind

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European Equity Strategy: Momentum unwind

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European Equity Strategy

Momentum unwind

The momentum surge has started to unwind. H1 2026 has seen aggressive momentum outperformance, 10 July 2026

with European high-momentum stocks outperforming low-momentum ones by 55% annualized. Yet, the trend

Equity Strategyis showing signs of reversing, with high-momentum stocks underperforming by 9% between June 22 and the

Europe

low earlier this week, marking the sharpest momentum reversal since early 2023.

All eyes on the AI capex trajectory: rising concerns around the sustainability of the AI capex boom appear

to have been the main catalyst for the momentum wobble, with the Philadelphia Semiconductor index down by

over 11% and the Korean KOSPI entering a bear market, driven by uncertainty around AI monetization in an

increasingly fragmented and competitive industry, compounded by cost inflation and political headwinds.

Sebastian Raedler >>

We remain positioned for a continued momentum reversal, given that: (a) the earlier run-up in Investment Strategist MLI (UK)

momentum performance means small disappointments or even insufficiently impressive earnings beats can +44 20 7996 1749

lead to significant drawdowns, as evidenced by Samsung’s shares falling by nearly 10% after the company sebastian.raedler@bofa.com

announced a 19-fold increase in quarterly operating profit that came in ahead of consensus expectations; (b) Thomas Pearce, CFA >> Investment Strategist

the incoming information points to a tricky path towards AI monetization, with a number of headwinds MLI (UK)

emerging over recent weeks. Our credit strategists highlight that past capex cycles have turned to bust due to +44tpearce@bofa.com20 7996 2081