Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Will Value Stocks Overtake Growth Shares After The Election?

By James PicernoStock MarketsOct 15, 2020 10:06AM ET
www.investing.com/analysis/will-value-stocks-overtake-growth-shares-after-the-election-200541166
Will Value Stocks Overtake Growth Shares After The Election?
By James Picerno   |  Oct 15, 2020 10:06AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Citigroup analysts say the probability is rising for a recovery in the value risk factor, which has trailed the equivalent for growth stocks in recent years. It’s anyone’s guess if they’re right. The market gods are consistently shy about revealing such insights in advance. Perhaps, then, it’s no surprise that many forecasts in recent years have argued that value is on the cusp of a rebound only to see the relentless dominance in growth persist. But maybe it’s different this time.

“Value always performed pretty well in the six months after the election,” advises Alexander Altmann, Citi’s head of US equity trading strategy. His favorable outlook for value is no sudden decision – he says he’s been partial to stocks in the value camp since May. “The magnitude of that performance did however vary depending on what kind of election outcome we got,” he explains via Bloomberg.

The rationale: a change in administrations that unleashes major policy adjustments can trigger a regime shift in markets. Assuming Joe Biden takes the White House and Democrats lead both chambers of Congress, “we should see a significant amount of rotation in the market,” he notes.

MarketWatch columnist Michael Brush agrees. “Value investing, which has been maligned for years, is about to come back in style,” he predicts, arguing that history suggests no less. “Elections have a long track record of doing wonders for value stocks, whose prices are deemed low compared with business prospects.” Citing research from the Bear Traps Report, he reports that value beat growth for six months following every presidential election since 1980.

Value Vs Growth
Value Vs Growth

Will history repeat? Maybe, but no one will confuse this post-1980 record as a statistically robust probability bias. Nonetheless, it’s an intriguing narrative and it inspires taking stock of where we stand in the value-growth horse race.

Let’s parse recent history with three sets of ETF proxies for large-cap, mid-cap and small-cap comparisons. In the first chart, the divergence is stark in favor of growth for the past five years. The iShares S&P 500 Growth ETF (NYSE:IVW) has surged 131% over that span, far above the relatively modest 50% rise for iShares S&P 500 Value ETF (NYSE:IVE).

IWM Daily Chart
IWM Daily Chart

The growth edge is far less dramatic for mid-cap stocks but conspicuous nonetheless. The iShares S&P Mid-Cap 400 Growth ETF (NYSE:IJK) is up nearly 67% over the last five years vs. 31% for iShares S&P Mid-Cap 400 Value ETF (NYSE:IJJ).

IJK Daily Chart
IJK Daily Chart

Growth’s lead is a bit tighter in the small-cap space. The iShares S&P Small-Cap 600 Growth ETF (NASDAQ:IJT) is ahead by nearly 60% since Oct. 2015 vs. a 31% increase for iShares S&P Small-Cap 600 Value ETF (NYSE:IJS).

IJT Daily Chart
IJT Daily Chart

How should we use this history? For investors with light or non-existent value exposure it may be a timely moment to rebalance the portfolio. But there are no guarantees that value will shine. The future remains as murky as ever, but if you’re inclined toward the value factor the market gods may finally be willing to reward this slice of equities.

Will Value Stocks Overtake Growth Shares After The Election?
 

Related Articles

Will Value Stocks Overtake Growth Shares After The Election?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Ben Ma
Ben Ma Oct 15, 2020 7:32PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
There is no value in this garbage market.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email