‘Growth’ stocks are making a comeback versus ‘Value’

19 нояб. 2019 г.

The market saw a big shift in early September when money started pouring into “value” stocks, like banks and energy. Investors had neglected them for years and they were supposed to benefit from the U.S. and China ending their trade war. But that’s been fading in recent weeks, especially with Apple and Microsoft flying to new highs.

This hourly chart compares two major ETFs tracking the two buckets of companies: The Vanguard Value ETF (VTV) and the Vanguard Growth ETF (VUG).

Notice how VTV initially surged ahead of VUG on September 5, right after Beijing confirmed it was holding trade talks with the White House. That strength continued until about two weeks ago.

The first setback was President Trump talking down hopes of a trade deal with China. Then came some weaker economic news – especially industrial production on November 15. Those two catalysts have dragged interest rates back lower and undermined one of the basic arguments in favor of “value.” Meanwhile, GDP estimates from the Atlanta Federal Reserve have nosedived from 1.5 percent to under half a percent. Topping it off today, oil is breaking down.

A backdrop like goes against the “value trade.” It could mean to watch out for a pullback in the banks because financials are the largest sector in the value index. But it could also help restore interest in the big Nasdaq companies that have led the market for years.

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