Value stocks now are beating growth by 10 points, but the easy money might be behind us

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OPINION: “If you want to bet that the future is like the past, you need to be a long-term investor rather than try to trade between value and growth,” Mark Hulbert writes.

Value stocks are on a tear, but before you bet on this continuing you should consider the history. After many years in a row in which it lagged growth stocks, value lately has come roaring back. Since the end of November, the S&P 500 Value Index has gained 8.2% versus a 2.1% loss for the S&P 500 Growth Index. This 10.3 percentage point spread is one of the highest ever recorded for a five-week period.

This randomness can be appreciated anecdotally. Think back to March 2021, which was another period in which value appeared to be reasserting its historical dominance over growth. Over the five weeks through March 8, 2021, the S&P 500 Value Index beat the S&P 500 Growth Index by even more than it has over this most recent period.

So if you’re keeping score for these three instances in which value beat growth by as much as it has recently, there’s one case in which value relative strength continued, one in which it reversed itself, and one in which there was no trend one way or the other. Good luck extrapolating that into the future.

Over the past century, value has significantly outperformed growth — on average, that is. I could find no pattern for when value’s relative strength becomes greater or lesser.

 

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