Which factors weathered the mega-cap slump that dragged The 500™ down in February? Explore highlights from the latest SPIVA U.S. Scorecard and the defensive factors standing up to challenging markets in this episode of The Market Measure.
Meet The Market Measure - a new video series providing fresh perspectives on markets through the lens of indices. Each month, get access to insights across geographies, asset classes and investment strategies.
To make sure you never miss an episode, sign up for content alerts.
[TRANSCRIPT]
Ben Vörös:
Hello, I'm Ben Vörös
Dasha Selivanova:
and I'm Dasha Selivanova
Ben Vörös, Dasha Selivanova:
and this is The Market Measure.
Ben Vörös:
February was a challenging month for U.S. equities. Our range of benchmark indices fell across the capitalization spectrum, with the S&P SmallCap 600 the hardest hit, down 6%, while the S&P 500 dropped 1%. U.S. Treasuries, on the other hand, had a strong month, with the S&P U.S. Treasury Bond Current 10-Year Index up 3%, its best monthly performance since 2023. Many international equity markets did much better than the U.S., with the S&P China 500 up 7% and the S&P Europe 350 up 4%. In a period when U.S. large caps underperformed, it was little surprise to see defensive factors outperform. The S&P 500 Low Volatility Index was by far the best performer among our reported range of S&P 500 factor indices, rising 4.7% and outperforming the U.S. bellwether by 6%. This was Low Volatility's second-best monthly performance versus the S&P 500 in the past 10 years. The underperformance of mega caps is threatening to be a theme of 2025. The Magnificent 7 made a negative contribution to the S&P 500 in February and year to date. However, stocks further down the capitalization range rose to the occasion. The horizontal axis of this chart shows the excess return of our range of factor indices in 2024, and the y-axis measures year-to-date 2025 excess returns. Indices in the top-left quadrant, including Low Volatility and the S&P 500 Dividend Aristocrats, turned from underperformance in 2024 to outperformance year to date, while those in the top right, including the S&P 500 Momentum Index, maintained outperformance both last year and so far in 2025. The concurrent year-to-date outperformance of Momentum and Low Volatility has been unusual, as the two factors exhibited differentiated performance cycles in recent quarters. As this chart shows, in the six quarters between Q3 2023 and Q4 2024, Low Volatility showed opposite periods of outperformance compared to Momentum. Year to date, however, both outperformed the S&P 500 by a wide margin.
Dasha Selivanova:
Momentum has indeed not just outperformed in the past three months, but has also excelled in recent years, primarily due to its strategic approach to constituent selection. Its dynamic strategy allowed it to outperform even the largest mega caps during periods when smaller companies took the lead. In 2024, it outperformed The 500 by an impressive 21%, resulting in a cumulative lifetime excess return of 99%. Our analysis highlights that nearly 95% of its excess return was driven by successful stock selection rather than sector weights, which contributed only marginally. Notably, just 10 companies were responsible for the majority of excess returns. Among these, familiar names like NVIDIA, Microsoft and Meta played significant roles. The S&P 500 Momentum Index undergoes a semi-annual rebalancing in March and September. The results sometimes favor larger constituents and other times tilt toward smaller ones. As of the latest data, the index slightly tilts towards smaller companies than its benchmark. For an in-depth analysis on Momentum's historical performance drivers, check out the full blog, Mom's Recipe: Sectors, Stocks and Size, on the Indexology blog website, where we also publish a wide range of month-end dashboards and research reports, among the most popular of which is the SPIVA Scorecards.
Ben Vörös:
SPIVA stands for S&P Indices versus Active, and in the last two decades, it has become the de facto scorekeeper of actively managed fund performances around the world. SPIVA Scorecards provide a wealth of in-depth data on active funds' performance, including Underperformance Rates, Risk-Adjusted Outperformance, Survivorship Rates, Equal Weighted Returns, Asset Weighted Returns, Quartile Breakpoints, as well as Analysis & Commentary on the market backdrop. The S&P SPIVA U.S. Scorecard, the first in our series of regional reports, was published on March 4th. In our largest and most-closely-watched comparison, 65% of all active large-cap U.S. equity funds underperformed the S&P 500, worse than the 60% rate observed in 2023 and slightly above the 64% average annual rate reported over the 24-year history of our SPIVA U.S. Scorecards. Looking at 2024 underperformance rates in other actively managed fund categories, we find that 79% of all domestic equity funds, 62% of mid-cap funds, 69% of international equity funds and 71% of emerging markets equity funds underperformed relevant benchmarks. Small-cap funds were a rare bright spot, as only 30% of funds lagged the S&P SmallCap 600. Fixed income results were generally better than those in equities, with an average one-year underperformance rate of 41% across all fund categories and majority outperformance in over two-thirds of categories. Performance among credit managers was mixed. 70% of General Investment-Grade funds outperformed, but 66% of High Yield funds underperformed. These are just some of the highlights of the 2024 SPIVA U.S. Scorecard, which contains detailed statistics on a total of 38 categories, 22 in equities and 16 in fixed income. To read the full report, head over to indexologyblog.com, where SPIVA has a dedicated sub-page. In addition to the SPIVA U.S. Scorecard, we'll also publish reports on eight other geographies in the coming weeks. So keep an eye out on additional insights on active fund performance around the world. At S&P Dow Jones Indices, we measure the markets
Dasha Selivanova:
and this was The Market Measure.
