The S&P 500 is often discussed as a single entity, but beneath its market-cap-weighted surface lies a dynamic interplay of investment factors. Different strategies, from Momentum and Growth to Value and Low Volatility, can offer unique pathways to navigate the same 500 stocks. So, which factors are currently in the driver’s seat, and which have taken a backseat?
In our latest Factor Flavors video insight, Mike dives into the ETF Action platform to show you exactly how to analyze these trends, offering a powerful lens through which to view the market.
Key Insights: What’s Driving the Market?
By creating a custom watchlist of ETFs that apply different factor overlays to the S&P 500, we can quickly identify key performance trends and portfolio characteristics. Here are the key takeaways from the analysis:
- Performance Divergence is Massive: Year-to-date, the performance gap between the best and worst-performing S&P 500 factor ETFs is a staggering 26%. This highlights that even with the same starting universe of stocks, how you invest matters immensely. Not surprisingly in the current market, Momentum (SPMO) leads the pack, while strategies combining low-volatility and high-dividend factors have lagged.
- Mega-Cap Dominance is Real: The analysis shows that only a handful of factor strategies have managed to outperform the standard market-cap-weighted S&P 500 (SPY). This underscores the powerful influence that mega-cap stocks have had on overall market returns.
- Factors Reveal Hidden Tilts: Using derived analytics, we can see that certain factor strategies produce unexpected portfolio tilts. For instance, some “Pure Value” and high-dividend S&P 500 ETFs actually exhibit a mid-cap profile, while the market-cap Value ETF (SPYV) currently registers as “Core.” This rules-based look-through provides a true snapshot of an ETF’s current holdings.
- Factor ETFs Are More Unique Than You Think: A common misconception is that factor ETFs tracking the same index will be largely similar. However, the Overlap Analyzer reveals a surprising amount of green, indicating very low commonality between these funds. Each strategy provides a genuinely distinct exposure, making them powerful tools for portfolio customization.
Conclusion: Take Control of Your Analysis
Understanding which factors are driving the market is no longer a guessing game. By leveraging the right tools, you can dissect broad indices like the S&P 500 to gain a significant analytical edge. The ability to track performance, risk metrics, sector exposures, and portfolio overlap in real-time transforms complex market data into actionable intelligence.
Ready to see for yourself? Unlock the power of ETF Action by creating your free member access account today!
Disclosures: This material is for informational purposes only and should not be considered investment advice. All investments, including ETFs, involve risk, including the possible loss of principal. Investors should consider their investment objectives, risks, charges, and expenses carefully before investing.
This analysis was developed by the team at ETF Action. We leverage advanced AI tools to assist in the drafting and refinement of our content, based on our expert prompts, direction, and final review.
