LIVE MARKETS-From growth to defense: How 2026's market turmoil is reshuffling the factor race

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FROM GROWTH TO DEFENSE: HOW 2026'S MARKET TURMOIL IS RESHUFFLING THE FACTOR RACE

On a potential Iran war off-ramp, the S&P 500 .SPX rallied 2.9% on Tuesday, for its biggest daily gain since May 12, 2025. Nevertheless, amid the recent chaos, the benchmark index is down 4.6% year-to-date, and down 6.5% from its January 27 record closing high.

Meanwhile, when it comes to the major investing style factors that have historically driven portfolio returns, low volatility and mid caps are neck and neck for the lead this year.

Investing style factors include stocks discounted to their fundamentals (value), financially sound companies (quality), size (small caps), stable, lower-risk stocks (low volatility), and stocks exhibiting upward price trends (momentum).

To this, let's add in as separate factors mid- and large-caps, high-growth companies (growth), and those stocks that provide income (dividends).

The S&P 500 index tumbled 5.1% in March, while the SPDR S&P 500 ETF Trust SPY.P lost 5.2%.

Here is a graphic showing 2026 YTD factor ETF percentage price changes as well as how they performed vs. the SPY (factor/SPY ratio change):

Perhaps not surprisingly, given this year's rise in uncertainty .VIX, 2025's last-place finisher, defensive low volatility SPLV.P, is out front, with a 2.4% advance.

Mid caps IJH.P are right on its heels with a 2.3% rise.

Dividends NOBL.Z are just off the pace with a 1.9% gain. Small caps IWM.P are up marginally with a 0.7% rise.

Value SPYV.P (-0.4%), quality QUAL.K (-3.4%) and momentum MTUM.K (-4.1%) are all negative year-to-date, but holding up better than the SPY.

Large caps SCHX.P (-4.7%) are roughly in line with the SPY.

Last year's winner, growth SPYG.P, is bringing up the rear, down 8.2%. In 2025, growth (+21.4%) edged out momentum (+21%) to claim the top spot on the investing style factors tote board.

All style factors posted sharp losses in March (-4.9% to -7.5%). Oddly enough, the two weakest groups in March were dividends and quality, both of which, in theory, would be more on the defensive side. That said, dividends were the leader through the end of February, so amid last month's rising correlations .COR3M and lower dispersion, dividends may have had the most to give back.

Value, momentum and small caps actually held up slightly better than the SPDR S&P 500 in March.

It's still early in the 2026 race, but traders will be keeping a close eye on all these factors as they jockey for position throughout the year.

(Terence Gabriel)

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