Something funny happened yesterday. Value stocks hit new all-time highs… and growth didn’t.
For years, we’ve heard the same lazy take: “It’s just a handful of growth stocks driving this weak market.”
But that was never true, and anyone who actually looks at the data knows it.
Yesterday was a perfect reminder.
Even with the growth indexes stalled, the large-cap Russell 1000 Value (IWD) and the small-cap Russell 2000 Value (IWN) both closed at fresh all-time highs.
These aren’t growth stocks. Not even close. By definition, these indexes exclude the growth names.
Make Value Investing Sexy Again!
There was a time when value investing was cool.
Ben Graham was basically a poster model, and Warren Buffett licking an ice cream cone was peak aspirational finance.
Value guys used to get all the girls.
Then the music stopped. And it stayed stopped for a long time.
For decades, value has trailed growth. Sure, we’ve had a few counter-trend bursts here and there. But broadly speaking, it’s been a growth investor’s world.
Lean toward value and you either underperformed… or worse, you were out of a job.
But not today.
Today, value is leading the charge. Large-cap value? New all-time highs. Small-cap value? New all-time highs.
Both hit them yesterday:
And yet how many people out there proudly call themselves “growth investors”? Almost all of them.
And in nearly every case, it’s pure recency bias.
They can’t remember the last time value was the place to be.
Most of them weren’t even around for it.
Value vs Growth
We can debate all day about what “value” really means and whether there’s some “value” hidden inside “growth.” But that’s not the point today.
Instead, let’s look at how these factors are actually represented. What do these ETFs own?
Start with large caps. In the Russell 1000 Growth Index, technology makes up more than 52%. In value? Just 11%. Financials are only 5% of growth, but more than 21% of value.
Value also carries far more industrials, energy, and basic materials, sectors that growth barely touches.
You see the same pattern in small caps. Small-cap growth has three times the tech exposure of small-cap value. Meanwhile, financials have roughly triple the weighting in value than in growth.
One twist as you move down the cap scale: Industrials actually become a major part of small-cap growth, even more so than in value.
But here’s the real takeaway: We’re getting more places to make money, not fewer.
As upside participation broadens and sector rotation keeps powering this tape, ending this bull market becomes a lot harder – if not impossible.
Eventually, the bears will have their turn. Rotation will stall. Participation will thin.
And when that day comes, I’ll be right here walking through exactly what we’re doing.
But that’s not today.
Today, it’s a bull market. We’re putting money to work.
And odds are, before the week is out, I’ll be adding to long positions again.
That’s what you do in strong markets.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs