Why value has been steaming ahead of growth

ON NORTH AMERICA

Investors often wonder not only about the potential return for equities as a whole but also the relative returns of growth and value stocks. This query has been more pertinent of late, as the markets have seen a divergence from their post-financial crisis patterns.

Over the past nine months, the Russell 1000 Value Index has out-performed the Russell 1000 Growth Index by a meaningful margin. So, what has caused the shift, and how likely is it that this trend will continue? Interestingly, the performance difference is almost entirely attributable to the relative weightings of technology and financials within each index. As of 31 March 2013, the growth index had a technology sector weighting that is 24% greater than that of the value. Conversely, financials comprise a 23% higher weighting in the value index versus the growth index. Relative to one ano...