Recently, much of the financial media has been occupied with discussing the potential of a bubble in markets. Some have compared the current sentiment to the “animal spirits” of the late 1990s.¹ Proponents of this view cite stretched valuations, retail-driven speculation and the circularity of transactions as evidence to support their claims. Whether or not one gives credence to these comparisons, understanding how different single- and multi-factor indices behave in such environments can help participants navigate conditions in a way that aligns with their level of conviction.

Factor performance can vary widely across regimes, particularly during periods marked by exuberance or correction. Reviewing S&P 500^® Factor Indices through time highlights this fluctuation. First, observing the period from the mid-1990s to the peak of the first tech bubble in 2000, Exhibit 1 shows the performance of The 500^® alongside the S&P 500 Quality Index, S&P 500 Enhanced Value Index and S&P 500 Momentum Index.

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The back-tested data in Exhibit 1 shows that, prior to the bursting of the bubble, the S&P 500 Momentum Index was by far the best performer, while the S&P 500 Quality Index also outperformed The 500 and the S&P 500 Enhanced Value Index materially underperformed as growth-oriented stocks led the market upward.

In contrast, Exhibit 2 shows the back-tested performance of the same four indices in the period following the peak. The S&P 500 Enhanced Value Index was the strongest performer by a wide margin, while the S&P 500 Momentum Index struggled. The S&P 500 Quality Index again outperformed The 500, which remained nearly flat during the first part of its “lost decade”.

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Finally, Exhibit 3 shows more recent performance, from January 2020 to November 2025. Compared with The 500, the S&P 500 Momentum Index has significantly outperformed, the S&P 500 Quality Index has also outperformed and the S&P 500 Enhanced Value Index has underperformed. This bares similarities to the late 1990s, though less extreme.

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Exhibits 1-3 illustrate how factor performance can vary significantly across market regimes. Some may look to factor indices as short-term measures of performance. Others may view one, or several, factor indices for the long term, citing evidence of their risk and/or behavioral premia, while understanding the associated tracking error.

For those less enthused by the prospect of significant deviation from The 500’s performance, the S&P 500 Quality, Value & Momentum (QVM) Top 90% Multi-factor Index may be interesting. The index measures the performance of S&P 500 constituents after excluding the bottom 10% with the lowest combined quality, value and momentum multi-factor score, thus exhibiting some loading on each factor. Exhibit 4 shows that this approach has historically outperformed The 500 while maintaining low tracking error and lower volatility than The 500, S&P 500 Enhanced Value Index and S&P 500 Momentum Index.

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No matter the view taken on whether or not the current market is a bubble akin to the late 1990s, our single- and multi-factor indices can assist in navigating all markets.

¹ See: Makortoff, Kalyeena. “Bank of England warns of growing risk that AI bubble could burst.” The Guardian. Oct. 8, 2025; Wigglesworth, Robin. “The AI bubble has reached its ‘fried chicken’ phase.” The Financial Times. Oct. 31, 2025; and “Why Fears of a Trillion-Dollar AI Bubble Are Growing.” Bloomberg. Nov. 24, 2025.

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