Tide Turning For Value ETFs Vs. Growth

November 22, 2016

The time may be right to pay closer attention to value equity ETFs. Among the many investment ideas circulating in the market in the early post-election days, value versus growth seems to be one that’s gaining a following.

Consider the recent performance of the Vanguard Value Index Fund (VTV) and the Vanguard Growth Index Fund (VUG). In the past one month, there’s been a jump in the performance of value stocks:

 

“If the initial reaction [to the election] can carry through, a shift from a growth tilt to a value tilt may be in order,” Clayton Fresk, portfolio manager at Stadion Money Management, told ETF.com.

“Looking past the bear market and recovery, this relationship has steadily favored growth since 2009,” he added. “However, that relationship has trended in favor of value since the beginning of 2016, and it has really spiked since the Trump election.”

Here’s what that value-versus-growth performance looks like in the past three years:

The reason for that performance in value names has a lot to do with sector exposures, Fresk says. In the case of value names, the “relative overweight” to financials and underweight to technology and consumer discretionary are what’s driving the recent performance.

In the past month, financials has been the best-performing S&P 500 sector, rallying more than 13%, or roughly twice the rally seen in the second-best-performing sector in the period—industrials. Technology, meanwhile, has been in the redin the past 30 days, sliding 0.4% in a month.

 

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