Is Value Investing Making a Comeback?

In light of the recent volatility in 2025 and the subsequent decline in U.S. equity markets, S&P Global Market Intelligence conducted an analysis of historical periods characterized by high volatility and underlying factor/style performance, leveraging our Alpha Factor Library (AFL) tool on the CIQ Platform.  The following analysis pertains to the S&P 500.  

The AFL tool categorizes investment styles into eight distinct factors: price momentum, historical growth, analyst expectations, earnings quality, valuation, capital efficiency, size and volatility. We rank equities based on their factor/style scores and classify them into five equally weighted quintiles.

AFL offers a comprehensive view of different market regimes. For our analysis, we defined high volatility markets as those where the average monthly VIX exceeds 18.5, while low volatility markets are characterized by an average monthly VIX of 18.5 or below. Over the past 30 years, we identified 56 distinct periods of high or low volatility. The longest stretch of high volatility lasted 44 months, from December 1996 to July 2000, while the longest low volatility period spanned 45 months, from October 2003 to June 2007.

Since the last high volatility period ended in March 2023, the S&P 500 has largely experienced a prolonged period of low volatility, with the exception of October 2024. However, March 2025 marked a return to a highly volatile equity market, with an average VIX reading of 21.83, compared to 15.85 over the previous two years.

In 2024, both Historical Growth and Analyst Expectations were the primary drivers of returns in the S&P 500. Yet, year-to-date in 2025, Valuation stands out as the only factor outperforming when examining Quintile 1 Active Factor Returns.  

This indicator combines several valuation metrics, including Book-to-Price (BP), Free Cash Flow to Price (FCFP), EBITDA to Enterprise Value (EBITDAEV), Earnings to Price (EP), Dividend to Price (DivP), and Sales to Enterprise Value (SEV).

Note: Value investing remains one of the most widely followed investment strategies, centered on accurately assessing a firm's worth. Factors influencing a firm's value include earnings (Ball and Brown, 1978), assets (Fama and French, 1993, 2008), cash flows (Tortoriello, 2009), and more. Our composite indicator reflects these elements, offering a holistic perspective on a firm's value.  

Value vs. Growth in Today’s Market

Year-to-date, we analyzed the performance of securities classified as Deep Value, Value, Blend, Growth, and High Growth. Deep Value represents the top quintile of securities ranked by the aforementioned value factors—these are stocks trading significantly below their intrinsic value. The second quintile is classified as Value. Notably, both Value and Deep Value have significantly outperformed their counterparts, returning 3.35% and 16.10%, respectively. This is a stark contrast to 2024, when Deep Value lagged behind Growth.

To deepen our analysis, we examined monthly returns for these categories. The trend remains consistent: Deep Value was the only group to yield positive returns in January, February, and March, with a particularly strong relative performance in March. 

As previously mentioned, Valuation is an equally weighted composite style comprising of unique factors. Analyzing these factors from an investment standpoint, we note that Value investing typically targets securities trading below their intrinsic value, characterized by lower Price-to-Book, Price-to-Cash Flow, and Price-to-Earnings ratios, alongside higher dividend yields. 

In the above table, we present the characteristics of the S&P 500, with Deep Value highlighted in the second row. For comparison, Deep Value trades at a Price-to-Book ratio of 1.81x, while the S&P 500 averages closer to a 15x multiple. 

Historical View

Looking back at historical periods of high volatility since 1990, we find that both price momentum and valuation have consistently outperformed during such times. 

To identify attractive value stocks, consider setting up a multi-factor screen for daily reports. Below, we have ranked all companies in the S&P 500 that fall within the top quintile based on EBITDA/Price, Dividend Yield, and EBITDA/Enterprise Value—these have been the three best-performing value factors month-to-date.