Factors in the top-right quadrant, particularly momentum, have outperformed both in June and YTD. Conversely, value-oriented styles such as dividends, equal weight, and value now lag YTD following significant underperformance in May and June.
Early Q3 data suggests another potential rotation. Small-caps and value are showing signs of renewed strength as growth and momentum valuations begin to soften. Through the first 10 days of July, small-caps are up over 3% compared to less than 1% for the S&P 500, and value has outperformed growth by approximately 0.5%.
We are encouraged by the broadening of market participation. After a highly concentrated 2023 and early 2024, rally breadth is expanding. Last year, only 31% of S&P 500 constituents outperformed the index, driven largely by the “Magnificent 7.” In contrast, 44% of S&P 500 members outperformed through the first half of 2025, and that number continues to grow thanks to small-cap and value strength in July.
This final chart shows GEM Factor Strategy composites relative to broad market benchmarks. Despite modest underperformance vs. the equal-weight S&P 500 in Q2, GEM Factor strategies have delivered strong YTD and long-term returns. International exposure has also added value, aided by a weakening U.S. dollar.
