The last time value stocks beat the S&P 500 this decisively in a single month, the dot-com bubble was coming apart.
The iShares Russell 1000 Value ETF (NYSE:IWD) is up 5% in October and touched a record high of $260.64 on Thursday.
Meanwhile, the SPDR S&P 500 ETF Trust (NYSE:SPY) has gained just 0.8% over the same stretch.
That 4.2-percentage-point gap is the widest monthly outperformance for value since February 2001, in data going back to IWD’s launch in 2000.
Against growth, the split is even wider.
The iShares Russell 1000 Growth ETF (NYSE:IWF) is down 3.3% this month. Year to date, IWD is up 23.8%, while IWF has gained only 2.4%.
Wall Street Is Rotating, Not Retreating
Thursday’s session showed the shift in real time.
Alphabet Inc. (NASDAQ:GOOGL) fell 12% after a disappointing third-quarter report. ServiceNow Inc. (NYSE:NOW) sank 25% on slower contract growth guidance.
On the same day, however, the Health Care Select Sector SPDR Fund (NYSE:XLV) touched an all-time high.
Investors are “increasingly distinguishing between companies successfully monetizing AI and those still incurring significant capital expenditures without a clear revenue or cash flow payoff,” Chris Osmond, chief investment officer at Fifth Third Wealth Advisors, said in emailed comments.
“The resulting environment favors selectivity: current cash flow over distant promises, balance-sheet strength over leverage, and companies that can demonstrate AI monetization rather than simply announce higher AI investment,” Osmond added.
February 2001: When The New Economy Ran Out Of Road
In early 2001, the Federal Reserve had already cut rates twice, and many investors treated the tech selloff as a buying opportunity. February proved them wrong.
The Invesco QQQ Trust (NASDAQ:QQQ) lost 26.2% that month, IWF dropped 17.8% and SPY fell 9.5%. IWD, by contrast, slipped just 2.7%.
Leadership changed hands. Stocks priced for perfection were repriced, while companies with ordinary earnings at ordinary valuations held their ground.
Why 2026 Is Not A Carbon Copy
In February 2001, value won because everything else fell faster. This October, value is rising in absolute terms, and the S&P 500 is still positive for the month.
In other words, money is moving within the market, not leaving it.
The rate backdrop also runs the other way. The Fed held rates at 3.75%-4.00% on Wednesday after raising them in September, and two policymakers dissented in favor of another hike.
As a result, the pressure falls hardest on companies whose value rests on profits far in the future.
“There are mounting signs of markets becoming increasingly unwilling to fund the AI infrastructure build-out,” Sebastian Raedler, investment strategist at Bank of America, said in an Oct. 23 Bank of America Global Research report.
Dennis DeBusschere of 22V Research made a similar point in an Oct. 27 note: “Cash return is scarcer now because of the capital committed to the AI buildout.”
The Question February 2001 Leaves Open
Not everyone sees a broader top forming.
“We don’t believe stocks are about to go into a bear market, despite all of the angst we’ve seen and heard this month about Cap Ex spending,” Chris Zaccarelli, chief investment officer at Northlight Asset Management, said in emailed comments.
Still, in 2001 value stocks’ best month against the market came early in a multiyear leadership change, not at its end.
Whether October 2026 opens a similar cycle depends on one thing Wall Street can’t price yet: how fast AI spending turns into AI revenue.
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