UPDATE ON GROWTH AND VALUE STOCKS
Burt White Chief Investment Officer, LPL Financial | Jeffrey Buchbinder, CFA Market Strategist, LPL Financial
Growth has been on a roll. Based on the Russell 3000 style indexes, growth’s 18% year-to-date gain is 14% ahead of value’s 4% advance. Looking further back, this growth outperformance is nothing new. Over the past 10 years, including the entire financial crisis period of 2008 and 2009, growth has outpaced value by about 50% [Figure 1], representing the longest period of growth outperformance since style indexes began to gain a following about 40 years ago. Using Fama-French* data back to the 1930s, before the Russell indexes were created, this is the longest bull market ever for growth stocks. Due to this observation setting off contrarian alarm bells in our heads, this week we discuss the potential for a value rebound.
A historically favorable condition for the value style to potentially thrive is an acceleration in economic growth. Although today’s economic growth is still subpar, it has picked up a bit from 2% gross domestic product (GDP) growth...