Trading places: Growth and value stocks YTD returns
Source: S&P Dow Jones Indices, as of October 7, 2021. Growth and value represented by the S&P 500 Pure Growth and Pure Value Indexes.
- Market volatility has remained elevated in recent weeks, the result of political uncertainty surrounding the U.S. debt ceiling, ongoing inflation pressures, supply constraints and evolving monetary policy.
- Despite the recent volatility, the S&P 500 has nearly doubled since March of 2020. The first leg of the recovery—from March through December 2020—was mostly characterized by a surge in growth stocks, led by technology and communication services stocks and historically low Treasury yields. Value stocks generally outperformed through the first half of 2021 as the global growth outlook improved, the pace of vaccinations increased and Treasury yields rose.
- As we’ve highlighted, the performance of a growing percentage of U.S. large cap stocks are highly sensitive to changes in interest rates. September provided an illustration of the risks of this rate reliance, as the 10-year Treasury rose 24 bps in a week while high-multiple growth stocks plummeted.
- Value’s recent outperformance, along with the summer swoon before it, has brought into sharp contrast both the speed at which factor leadership has changed this year as well as the degree to which stock performance has itself become rate dependent.
- With this in mind, investors need to be mindful of duration risk across their portfolios. Adopting a balanced, style-agnostic approach also may be more important than ever to capture returns in rapidly changing markets like todays.