Who Killed The Random Walk? | Victor Haghani on Momentum, Passive Investing, and LTCM

Watch on YouTube ↗  |  August 04, 2026 at 18:58  |  1:34:50  |  Monetary Matters
Speakers
Jack Farley — Host, Monetary Matters
Victor Haghani — Professor of Finance, Fordham University

Summary

Victor Haghani presents his new paper explaining how extrapolators, static asset allocators, and value investors interact to produce momentum, excess volatility, and boom-bust cycles. He argues US equities will return only about 6% annually, while non-US stocks look more attractive, leading Elm Wealth to underweight US equities and overweight ex-US. Jack Farley remains bullish on semiconductors and specific names like Lam Research and Micron based on underestimated earnings.

  • Victor Haghani introduces a multi-agent model (extrapolators, static allocators, value investors) that explains market anomalies like momentum and boom/bust cycles.
  • Momentum remains profitable because capital chasing it is limited relative to return-chasing investors.
  • Passive asset allocation (fixed 60/40) is problematic, while market-cap-weighted index funds are not.
  • US equities are expected to return ~6% nominal with only a 1% risk premium, leading to an underweight stance.
  • Non-US equities offer higher long-term returns; Elm Wealth is overweight ex-US stocks.
  • Buybacks and a lack of IPOs have lifted US stocks, but a shift could trigger extrapolator selling and market declines.
  • Jack Farley is bullish on semiconductors, Lam Research, and Micron due to underestimated earnings.
  • Elm Wealth’s dynamic strategy combines value and momentum, and currently underweights long bonds because of negative momentum.
Ideas
Victor Haghani Professor of Finance, Fordham University 14:08
Momentum anomaly persists; limited capital chasing it.
Momentum investing has been persistently profitable because it is driven by extrapolators (return chasers) whose behavior creates trends, and the capital allocated to pure momentum strategies remains limited relative to the size of the market. This prevents momentum from being arbitraged away, making it a robust anomaly.
MTUM HIGH
Victor Haghani Professor of Finance, Fordham University 29:34
US equities offer only 1% risk premium.
US equity valuations are extremely high, with a long-term expected return of only ~6% and a risk premium of just 1% over safe assets. Buybacks, static asset allocators, and extrapolators have inflated prices, but the low expected return makes US equities unattractive. Elm Wealth is notably underweight US equities.
S HIGH
Victor Haghani Professor of Finance, Fordham University 32:22
Non-US equities offer better long-term returns.
Non-US equities offer healthier long-term returns relative to safe assets than US equities. Valuation-based earnings yields are higher, momentum is positive, and the risk environment is low. Elm Wealth is quite overweight non-US equities.
VXUS HIGH
Jack Farley Host, Monetary Matters 62:56
Semiconductor earnings growth remains exceptional and underestimated.
Extraordinary earnings growth in the semiconductor space will continue, driven by AI capex and hyperscaler spending, making the sector bullish. Analyst estimates for Lam Research are too low; if Lam Research's earnings exceed expectations, memory prices will remain high, leaving Micron trading at only 8x earnings and undervalued.
SMH LRCX MU HIGH
Victor Haghani Professor of Finance, Fordham University 73:02
Value plus momentum is the most robust strategy.
The combination of long-term value and momentum is the most robust investment approach across markets. Historical evidence and their model show that putting value (focus on long-term cash flows) together with momentum (as a risk signal or allocation overlay) yields the best risk-adjusted returns.
Value and Momentum Factor Strategy MED
Victor Haghani Professor of Finance, Fordham University 88:26
Long bonds show negative momentum; avoid now.
TIPS and nominal long-term bonds are currently in a negative momentum state, signaling elevated risk. Elm Wealth is underweight these bonds and instead overweight treasury bills, waiting for interest rates and bond prices to stabilize before potentially re-entering.
TLT MED
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This Monetary Matters video, published August 04, 2026, features Victor Haghani, Jack Farley discussing MTUM, S, VXUS, SMH, LRCX, MU, Value and Momentum Factor Strategy, TLT. 6 trade ideas extracted by AI with direction and confidence scoring.

Speakers: Victor Haghani, Jack Farley  · Tickers: MTUM, S, VXUS, SMH, LRCX, MU, Value and Momentum Factor Strategy, TLT