Growth Still Leading Equity-Factor Race As Value Sinks In 2018

Despite a turbulent run for the US stock market over the past two months, the growth factor’s edge is intact by a solid margin relative to value, based on a set of ETFs. Although year-to-date equity returns generally have been trimmed recently, the growth-value divide remains stark, with the former still posting a healthy gain in 2018 while the latter has deteriorated to a slight loss.

Large-cap growth remains in first place by a nose for year-to-date performance through yesterday’s close (Nov. 28). The iShares S&P 500 Growth (IVW) is up a solid 8.4% so far in 2018. Second place for this year is currently split between iShares S&P Small-Cap 600 Growth (IJT) and iShares Edge MSCI Minimum Volatility USA (USMV) – each fund is ahead by 8.2%.

On the flip side, three value-factor ETFs have slipped into the red for year-to-date results, posting mildly negative returns for the small-, mid- and large-cap buckets. The iShares S&P Mid-Cap 400 Value ETF (IJJ), a mid-cap portfolio, suffers the deepest setback, falling 1.2% so far in 2018.

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By James Picerno

Whatever’s driving value stocks down this year, no one can blame a broad definition of equity beta. The SPDR S&P 500 (SPY), a widely followed benchmark of US equities, is up 4.2% year to date.

Some investors have been encouraged by value’s modestly firmer performance over the past month relative to growth. Is that a sign that a leadership transition is underway? Perhaps, but it could easily be noise. Indeed, the year-to-date profile at the moment still favors growth by a substantial degree. As the chart below suggests, the upside momentum in large-cap growth stocks (IVW), for instance, remains considerable vs. its value counterpart (IVE).

Growth’s sizable edge in the large-cap space holds up for the trailing three-year period, too.

The growth factor’s performance leadership won’t last forever, but for the moment it’s not yet obvious that a sustainable renaissance in value has arrived.

For additional research on the factor ETFs cited above, here are links to the summary pages at

iShares Edge MSCI Min Vol USA (USMV) – low-volatility
Vanguard High Dividend Yield ETF (VYM) – high-dividend yields
iShares Edge MSCI USA Quality Factor (QUAL) – quality stocks
iShares Edge MSCI USA Momentum Factor (MTUM) – price momentum

iShares Core S&P Small-Cap (IJR) – small-cap core
iShares S&P Small-Cap 600 Value (IJS) – small-cap value stocks
iShares S&P Small-Cap 600 Growth (IJT) — small-cap growth

iShares S&P Mid-Cap 400 Growth (IJK) — mid-cap growth
iShares S&P Mid-Cap 400 Value (IJJ) – mid-cap value stocks

iShares S&P 500 Value (IVE) – large-cap value stocks
iShares S&P 500 Growth (IVW)

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