Indexology^® Blog

The tale of a footrace between a determined tortoise and a swift but ultimately complacent hare has been with us for a long time. The earliest known version is two and a half thousand years old; it begins with the hare mocking the tortoise’s slow feet, which leads to a challenge and a contest, and ends in a surprising victory.

We recently published a paper on the rise of passive investing in the fixed income markets and borrowed the title of Aesop’s fable for our purposes. Those who are more audibly inclined can hear an interview on the topic conducted via S&P Global’s “The Essential Podcast”—which I must admit was great fun to participate in.

There are a couple of ways in which a comparison between Aesop’s fable and passive bond investing may be germane. On the one hand, active investing is the more nimble and celebrated approach: beating the index, never settling for “average,” in comparison to the methodical and pedestrian process of passively tracking a market. In this reading, active managers play the role of the hare, index investors the tortoise.

On the other hand, the story of passive investing is more frequently told with regards to the stock market: the first index fund, the first ETF, the greatest proportion of assets—are all assigned to the equity story. The stock markets (and their indices) are also subject to more glamorous and exciting media coverage, most of the time. In terms of passive adoption, it is the bond markets that are the tortoise.

Both interpretations align with a general perception among professional investors that the bond markets are more suited to active management. It seems to be widely believed that active managers have a greater success rate in bonds, and while that may not necessarily be true, it is a fact that passive adoption is less material among bond mutual funds, and tracking bond indices can be much harder than tracking equity indices.

Nonetheless, much like the slow-and-steady tortoise, passive investing is catching up in bonds. This is a trend of significant importance to those working in or using financial services. If the current trajectory continues, the profession of fixed income investment management may be set for a fundamental evolution—echoing that which has occurred in equities over the past 50 years.

Slow and steady doesn’t always win the race, but there is mounting evidence—including in our SPIVA^® Scorecards—suggesting that it’s not a bad approach to the markets. To dig into the details, we invite you to take a dive into the paper or listen to the podcast.

What are the potential benefits of a sector neutral approach to S&P Dividend Aristocrats? S&P DJI’s Rupert Watts and State Street Global Advisors’ Colin Ireland explore the construction and range of potential applications for the S&P Sector-Neutral High Yield Dividend Aristocrats.

Meet the S&P 500 RavenPack AI Index, a multi-asset index that applies a news analytics algorithm powered by RavenPack to select S&P 500 sectors with the strongest news sentiment for use in its sector rotation process. The index combines U.S. equities and fixed income, complemented by a daily risk control mechanism that seeks to maintain a target volatility of 5%.

“I think it’s from all those dog-gone cocoa beans. Hey, by the way, did you guys know that chocolate contains a property that triggers the release of endorphins? Gives one the feeling of being in love.” -Willy Wonka, Charlie and the Chocolate Factory (2005)

Inflation presented a direct hit to consumers at the pump, with gasoline futures moving in near lockstep with oil. Petrol prices from crude, gasoil and gasoline rose 16%, 17% and 18% YTD, respectively. The S&P GSCI All Crude, which makes up over 42% of the broad index, is trading at a six-month high on the back of production cuts by OPEC+. These cuts offset yet another record in U.S. crude oil production, according to the Energy Information Administration. Strong petroleum performance led the S&P GSCI to an 10.4% YTD return, a solid start that perhaps is overshadowed only by the S&P 500^® at all-time highs. At S&P Global’s recent CERAWeek event, leading commodity market participants engaged in discussions ranging from energy transition to geopolitics. Nickel is at the center of both, due to its importance as a primary metal for electric vehicles. Indonesia accounts for over half of nickel production and is pushing for an OPEC+ style cartel to manage future supply. The S&P GSCI Nickel continues to lag the broader commodity market, down 6.7% for the month and 33% lower over the past year.

Cocoa futures hit an all-time high as a perfect storm fueled prices. Poor weather in West Africa’s prime cocoa growing region continues to be ravaged by El Niño weather patterns. Crop yields dropped over 10% due to extreme rain, then drought, in 2023. This acutely impacted growing regions beset by ageing trees near the end of their fruit bearing life and further strained by black pod disease, a fungus killing cocoa trees. Chocolate demand driven by Easter holidays in the west pushed demand expectations to 370 thousand tons more than the 2024 supply, according to the International Cocoa Organization. Pricing surged beyond USD 10,000 per ton and were up 147% on the year.

Gold is another commodity hitting record highs this month. The perceived safety of gold continues to attract assets in an environment dominated by war, political upheaval and central bankers balancing inflationary concerns against continued economic growth. Unlike its digital upstart Bitcoin, gold has been transported across political borders for millennia, acting as a hedge against global economic uncertainty. This century, gold continues to outpace the S&P 500, with an average annual total return of 8% for the Dow Jones Commodity Index Gold compared to 7.4% for the S&P 500.

Why is the S&P 500 relevant to markets around the world? Take a closer look at this iconic index with S&P DJI’s Priscilla Luk and Hang Seng Investment Management’s Yvonne Ngai, including its role in our daily lives and some key highlights about why the S&P 500 is widely regarded as the best single gauge of U.S. large-cap equities.