MW Value stocks outperform this quarter as growth equities struggle in 'downtrend'
By Christine Idzelis
'Value-over-growth trade that began to emerge during the August rebound remains intact,' says analyst at Sevens Report Research
Value stocks in the U.S. are beating growth equities lately, with outperformance that seems set to continue based on technical analysis, according to Sevens Report Research.
The Vanguard Value ETF VTV rose a sharp 1.1% on Monday, bringing its gain so far this quarter to 5.5%, according to FactSet data. By contrast, the Vanguard Growth ETF VUG is down 3.6% in the third quarter, even after its Monday climb of 1.2%.
"Value" outperformed "growth" by two percentage points in the U.S. stock market's slump last week, with value equities still "near all-time highs while a downtrend has emerged" in the growth category, said Tyler Richey, a chartered market technician at Sevens Report, in a note Monday.
Shares of the Vanguard Value ETF, which tracks an index of U.S. large-cap value stocks, declined 3.1% last week, according to FactSet data. The Vanguard Growth ETF, whose performance is based on an index of large-cap growth stocks in the U.S., fell a steeper 5.1% over the same period.
"Stocks rolled over hard to start September last week," said Richey.
Read: S&P 500 just saw its worst first week of September since 1953, this chart shows
But "the value-over-growth trade that began to emerge during the August rebound remains intact," he said, "with a deteriorating technical backdrop" for the Vanguard Growth ETF and "a weakening but still more resilient technical picture" for the Vanguard Value ETF.
Still, U.S. growth stocks remain ahead of value so far in 2024 despite their recent underperformance.
The Vanguard Growth ETF is up 16% this year through Monday, exceeding the Vanguard Value ETF's rise of 13.2% over the same stretch, according to FactSet data.
Small-caps
Small-cap equities measured by the Russell 2000 index are trailing far behind U.S. large-cap stocks in 2024, but value has outperformed this quarter in that universe as well.
The Russell 2000 Value index XX:RUJ is up 4% in the third quarter through Monday, bringing its year-to-date gain to 1.9%. The Russell 2000 Growth index XX:RUO is trailing in the third quarter with a rise of 1%, but its climb in 2024 is bigger at 5.1%.
Meanwhile, Rob Arnott's Research Affiliates has a new ETF betting on certain small-cap value stocks that is set to begin trading on Tuesday. The Research Affiliates Deletions ETF, which will trade under the ticker symbol NIXT, targets small-cap value stocks that have been booted from market-capitalization-weighted indexes.
Read: Small-cap stocks unloved in ETF flows - but Rob Arnott likes these 'underdogs'
The U.S. stock market broadly rebounded sharply Monday, with the Dow Jones Industrial Average DJIA , S&P 500 SPX and technology-heavy Nasdaq Composite COMP all advancing 1.2%, according to FactSet data. The Russell 2000 RUT finished the trading session with a more modest gain of 0.3%.
"Technicals and trend analysis suggest value over growth" is set up to continue in the second half of 2024, said Richey.
-Christine Idzelis
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(END) Dow Jones Newswires
September 09, 2024 17:28 ET (21:28 GMT)
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