The style-box updates feature the iShares ETF’s since for the mid-quarter updates, the performance data on the benchmarks is not available until the end of every month, and then reported after a day or two delay. The goal was to provide something for readers twice a quarter. Although the data isn’t shown, the Vanguard ETF series is also being tracked to see how Vanguard compares to iShares in terms of ETF returns.
From the last style-box update in mid-November ’21, (found here), both large-cap growth and value improved their return in the last 6 weeks of the year, while for mid and small-cap styles. both growth and value traded lower into year-end. Growth is still outperforming value in the large-cap sector, while value in mid and smalls outperformed for the year.
In this update, which is the above iShare ETF’s with longer-term average, annual, returns, large-cap growth has generated far superior returns than the other styles, particularly the 3 and 5-year return periods. Readers have likely seen numerous charts of “large-cap growth vs large-cap value” but these numbers highlight the return differential at the end of the last decade.
The interesting thing about this year if you look at the large-cap numbers at the top of the first spreadsheet, is that earlier in 2021, value outperformed growth through June 30 ’21 probably due to the fact that the 10-year Treasury yield peaked at 1.75% in mid-March ’21 and the increase in that rate from it’s mid-August ’20 lows near 55 basis points. This period could have been the first example of growth stocks reactions to higher interest rates.
Summary/Conclusion: In 2021, mid and small-cap value finally beat their growth brethren, but in large-cap, growth continues to be the king. Perhaps 2022 is the year, large-cap growth succumbs to “mean-reversion” in terms of longer-term returns ? Inquiring minds want to know.
Does any of this help with forward return expectations? Take a look again at the 2nd spreadsheet above and the 3 and 5-year premium returns large-cap growth has experienced relative to mid and small-cap value. That’s 1,300 bps a year better for those time frames versus value.