However, over the past six months, mid cap value stocks have beaten growth.Investors may find more value in value stocks this year.The technology and growth-heavy Nasdaq finished 2024 up about 30%, while the S&P 500 gained 23% last year. Most of the gains came from the growth stocks, as theThere was a lot of talk about the broadening of the market in 2024, as experts anticipated that investors would move more into smaller cap stocks from overpriced large caps.
That happened, to an extent, as smaller-cap stocks rallied in the second half. But large cap valuations have remained high. While a summer swoon brought the S&P 500’s P/E ratio down a bit, a fall rally spurred by interest rate cuts, among other factors, sent large caps soaring. With that, valuations increased again, rising back toward a P/E of 30 for the S&P 500. A negative December for the S&P 500 brought valuations down a bit, but as of January 2, the P/E of the S&P 500 was still 29, which is historically high. It is not as high as 2021 when it hit 40, but the P/E is close to the highest it has been since then. However, perhaps a better gauge of growth stock valuations is the Nasdaq 100, which is almost entirely made up of growth stocks. As of December 31, the Nasdaq 100 P/E was 36.68, nearly at the all-time high level of 38.57 in 2021.Value stocks come into 2025 with some momentum. While the annual returns versus growth stocks paled in comparison, value stocks closed the gap somewhat in the second half. Over the past six months, the Russell 1000 Growth index has returned 19% compared to 14% for the Russell 1000 value index. The gains for the Russell 1000 Value index fall almost entirely within the mid cap space. Mid cap value stocks, as measured by the S&P 400, returned 21.5% over the past six months, compared to just 8% for the S&P 400 Growth index. That’s a trend that investors should take note of. There are several factors that should help value stocks in 202