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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This information has been prepared by QA, is provided for informational purposes only and does not constitute investment advice. It contains general information, is not suitable for everyone and is subject to change without notice. The views and opinions expressed in this report are solely those of QA and are current as of the date of writing.  While the content is provided in good faith to provide a general commentary of current market factors and conditions, the views and opinions expressed are limited in scope and QA makes no representation or warranty as to the accuracy or completeness of the information provided. Past performance of the global investment markets is not a guarantee of future results.

The index performance results referenced in this report represent past performance and are not a guarantee of future performance. Investment returns and principal value will fluctuate and are subject to market volatility, so that a client’s investment, when sold, may be worth more or less than the original cost. Indices are unmanaged and investors cannot invest directly in an index. An index’s performance does not reflect the deduction of transaction costs, management fees, or other costs which would reduce returns.

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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