Style Is Back

September 06, 2007

Yesterday, I read the Wall Street Journal cover to cover. It's a rare pleasure, and a good one, as you can find some fascinating information in there.

For starters, there's the snarky RAFI ad. I hadn't seen it before. It's a play on the recent 50th birthday celebration of the S&P 500, and reads:

Happy 50th Anniversary, Cap-Weighting ...

... here's to a wonderful retirement.

You can see it on the Research Affiliates Web site.

Talk about an insider ad! The actual information about the RAFI indexes is in tiny print. And the number of people who know that the S&P 500 just turned 50 is probably ... well ... pretty small. They don't even mention the S&P 500 as a name. The ad's purpose seems to be to stick a thumb in the eye of the S&P 500, pure and simple.

I guess we know where Rob Arnott stands about whether his Fundamental Indexes are a replacement for cap weighting or just an alternative investment approach...

My favorite part of reading the Journal, however, is often the Data section, where they do a great job summarizing the performance of various indexes and ETFs. And one thing that jumped out at me - and which I also noticed in the last issue of ETFR - is that style is back, big-time.

For the last few years, the gap between growth and value performance has been shrinking. We've all seen the headlines: I think I've read at least three articles entitled "Style Is Dead." Rydex even went so far as to launch "pure style" indexes, which remove the core components and amplify the style aspects, in an attempt to restore style to relevance. (I like those indexes quite a bit, actually.)

But this year, you don't need pure style to make the case for style-based investments. Style is back, as I said, and growth is leading the way.

Here's the performance for the DJ Wilshire style indexes year-to-date:

MidCap Growth


Small-Cap Growth




Large-Cap Growth








Large-Cap Value




Midcap Value


Small-Cap Value


It doesn't get any clearer than that. Growth, writ large, is outperforming value by 5.4% year-to-date. Mid-cap growth, the top performer, has nearly 12% on small-cap value.

People have been saying for a long time that growth would have its day, and that day appears to be now.


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