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Have anyone notice the recent changes of growth stocks to value stocks ?
Vanguard growth index, VIGAX, -1.54% on 11/10/20 Vanguard value index, VVIAX, +1.44% on 11/10/20
Since the announcement of Pfizer's vaccine, rotation to non-tech sectors has accelerated. Also all my value oriented funds are moving up much faster than the growth funds.
One didn't need to look at any funds to see this. The sharp divergence between the Dow (value leaning), the S&P 500 (blend), and the Nasdaq 100 (growth) has been very apparent over the past couple of days. (There's a reversal today, so far.)
Financials have been value stocks for a good while. With an abrupt uptick in rates (and a steepening yield curve) financials have done well. Long-dead Dodge and Cox has begun to awaken in recent days, due most likely to their long held bet on rising rates and heavy exposure to financials. An outsized bet on energy has also helped D&C recently with oil “exploding” higher the past 3 or 4 trading sessions.
Yes - the divergence has been stark recently. Will it last? I don’t normally predict the future.
Added : 0.98% on the 10 year doesn’t sound like much. But, compared to 0.60% 2 or 3 weeks ago it’s a big move. (Treasury market is closed today.)
Thank you for the plot. I watch the indices as they diverted this week. Seem like the changes correspond to the vaccine news. Everyone is hoping Pfizer vaccine will be available in January 2021.
REIT and utility sectors are coming back. My value oriented Yacktman fund is in black for the year. Many value MFs are trailing the growth funds by over 20%.
Maybe this is finally it. Personally, I've been burned by supposed value rotation before. I own no value funds. I suppose I do own value stocks, but that was never my rationale for buying them. I do think I might pick up some XOM, if it comes down a bit.
Small-cap value movement is even sharper. Add IJS to msf's graph. May be the small-cap and value-factors may come into play after being out of favor vs. large growth for a while. I stay diversified with a small-value tilt.
Maybe this is finally it. Personally, I've been burned by supposed value rotation before. I own no value funds. I suppose I do own value stocks, but that was never my rationale for buying them. I do think I might pick up some XOM, if it comes down a bit.
There’s a growth vs value chart in the link that I find fascinating. It shows that as of 11/11/20, on a one-year basis, the growth fund IVW has outpaced the value fund IVE by close to the extreme for the last 20 years. A spread of 34.2% . (!). No thoughts on when that might revert.
Weighting issues aside (plug in RSP to see that dynamic delta), value just gets hammered with any crashes, outperforms growth otherwise for the most part or at least keeps up, but the 09 and 20 crashes --- everyone but me knows these were close to on the same day???? --- crippled value.
Big ups for value the last couple months. Odd. Wonder if it lasts.
Lately I've been looking at the blend space. Took a rather close look comparing Wisdom Trees dividend ETFs (dividend weighted, total, small and mid) versus ProShares newer suite of dividend ETFs based on dividend growth. From what I can discern, the "growth" component in the ProShare ETFs protects a bit against major drawdowns while the "value" component inherent to dividend stocks generally makes them a good choice in the reversion to the mean play (value catching up to growth) if it's real. Anyway, I switched from WT to PS based on my research except on the "total" dividend ETF since PS is too new and too small, hardly any trades, but will likely switch once liquidity improves. We'll see.
2 points: 1) The average Joe investor needs to own just the SPY which is a blend index. This index will adjust according to the market anyway. No need to worry or make a decision what to do. 2) The big high tech companies are so dominated they have to participate in any meaningful long term performance.
Here is one prognosticator's thinking about the durability of the recent value bump.
Notably, the rotation to "value" is likely premature as these companies specifically require a more robust economy to generate revenue and earnings growth. The current environment is not conducive to that. Expect a reversal of the trade soon, and money rotates back towards "pandemic" related companies.
"The "great rotation" doesn't have to be all that great. In other words, when investors do see a rotation, it may not necessarily mean that all large-cap growth or the "Big 5," i.e. FAAMG, need to be sold.
It could simply mean that large-cap growth and Tech and many of the names seeing multiple expansion with the COVID-19 lockdown spend a year consolidating the gains of the last 4-5 years, as the underperforming styles and sector laggards like Financials and Energy play a little catch-up."
Comments
Chart with DIA, VFINX, QQQ over past few days.
Yes - the divergence has been stark recently. Will it last? I don’t normally predict the future.
Added : 0.98% on the 10 year doesn’t sound like much. But, compared to 0.60% 2 or 3 weeks ago it’s a big move. (Treasury market is closed today.)
REIT and utility sectors are coming back. My value oriented Yacktman fund is in black for the year. Many value MFs are trailing the growth funds by over 20%.
Gold is falling as well.
I own no value funds. I suppose I do own value stocks, but that was never my rationale for buying them. I do think I might pick up some XOM, if it comes down a bit.
Derf
pfizers-vaccine-read-out-what-will-happen-to-value-stocks
The Capital Speculator
What happened today? The markets never move in a straight line.
http://quotes.morningstar.com/chart/fund/chart.action?t=fxaix
Weighting issues aside (plug in RSP to see that dynamic delta), value just gets hammered with any crashes, outperforms growth otherwise for the most part or at least keeps up, but the 09 and 20 crashes --- everyone but me knows these were close to on the same day???? --- crippled value.
Big ups for value the last couple months. Odd. Wonder if it lasts.
https://www.washingtonpost.com/business/2020/11/13/value-investing-growth-investing/
1) The average Joe investor needs to own just the SPY which is a blend index. This index will adjust according to the market anyway. No need to worry or make a decision what to do.
2) The big high tech companies are so dominated they have to participate in any meaningful long term performance.
But, at least for a short time FMIJX and some other funds with a value tilt have shown some some signs of life!
"The "great rotation" doesn't have to be all that great. In other words, when investors do see a rotation, it may not necessarily mean that all large-cap growth or the "Big 5," i.e. FAAMG, need to be sold.
It could simply mean that large-cap growth and Tech and many of the names seeing multiple expansion with the COVID-19 lockdown spend a year consolidating the gains of the last 4-5 years, as the underperforming styles and sector laggards like Financials and Energy play a little catch-up."
Style-Box Strategy Update: The Great Rotation Begins