Chart of Interest – The Much-Anticipated Return of Value?

It’s been talked about.  Investors had thought it would happen in prior months.  And now it looks to have arrived.  The much anticipated return of Value stocks, as they appear to finally be taking on market leadership.  Not to get ahead of ourselves, but this chart of the ratio of US Growth stocks versus US Value stocks looks ready to break out from months of transition to a position of Value leadership.

Why is this so closely watched?  The post-March 2020 rally has been heavily one-sided with Growth stocks leading the way.  (“Growth” stocks are generally identified as less sensitive to general economic conditions, whereas “Value” stocks are typically reliant on healthy economic conditions).  A shift to Value leadership would further confirm that the global economy has re-asserted itself and news of improving economic growth can be expected.  And not just the “less-bad” improvement that has seen a slowing in the rate of economic contraction on the back of the monetary and fiscal authorities’ actions.  But now, signs of the end of the contraction and a return to fundamental growth evidenced by leadership from those sectors most tied to economic health, e.g., Financials, Industrials, Materials.

And if this breakout of Value’s leadership is sustainable, this will be one more signal that the US economy continues to distance itself from the economic toll of the pandemic-driven era in 2020.

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The Russell 3000 Growth Index measures the performance of the broad growth segment of the US equity universe.

The Russell 3000® Value Index measures the performance of the broad value segment of the US equity universe.

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