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Growth Still Leading Equity-Factor Race As Value Sinks In 2018

Published 11/29/2018, 06:31 AM

Despite a turbulent run for the US stock market over the past two months, the growth factor’s edge is intact by a solid margin relative to value, based on a set of ETFs. Although year-to-date equity returns generally have been trimmed recently, the growth-value divide remains stark, with the former still posting a healthy gain in 2018 while the latter has deteriorated to a slight loss.

Large-cap growth remains in first place by a nose for year-to-date performance through yesterday’s close (Nov. 28). The iShares S&P 500 Growth (IVW) is up a solid 8.4% so far in 2018. Second place for this year is currently split between iShares S&P Small-Cap 600 Growth (IJT) and iShares Edge MSCI Minimum Volatility USA (USMV) – each fund is ahead by 8.2%.

On the flip side, three value-factor ETFs have slipped into the red for year-to-date results, posting mildly negative returns for the small-, mid- and large-cap buckets. The iShares S&P Mid-Cap 400 Value ETF (IJJ), a mid-cap portfolio, suffers the deepest setback, falling 1.2% so far in 2018.

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By James Picerno

Whatever’s driving value stocks down this year, no one can blame a broad definition of equity beta. The SPDR S&P 500 (NYSE:SPY), a widely followed benchmark of US equities, is up 4.2% year to date.

S&P 500 SPY Chart

Some investors have been encouraged by value’s modestly firmer performance over the past month relative to growth. Is that a sign that a leadership transition is underway? Perhaps, but it could easily be noise. Indeed, the year-to-date profile at the moment still favors growth by a substantial degree. As the chart below suggests, the upside momentum in large-cap growth stocks (IVW), for instance, remains considerable vs. its value counterpart (IVE).

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IVW Chart

Growth’s sizable edge in the large-cap space holds up for the trailing three-year period, too.

IVW Chart

The growth factor’s performance leadership won’t last forever, but for the moment it’s not yet obvious that a sustainable renaissance in value has arrived

Disclosure: Originally published at Saxo Bank TradingFloor.com

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