S&P500: Growth Has Been Kicking Value's Butt

For this week’s edition of the Equity Leaders Weekly, we are going to look at SIA’s number one asset class in the Asset Class Rank List, US Equity, by looking at the performance of the S&P 500 Index. In addition, we will also examine two important style themes of Growth Investing versus Value Investing (i.e. investing in Growth Stocks versus Value Stocks) and more specifically, what theme has been the predominant driver in the US Equity area.

S&P 500 Index (SPX.I)

The last time we looked at the S&P 500 Index was on the Feb 1 edition of the Equity Leaders Weekly. After a very strong start to the year where the S&P 500 Index charged onto new all-time highs in early February, the index pulled back in the spring as we saw some temporary skittishness develop in the equity markets during this time.

However, as spring came to an end, we see that the index has regained its footing and most recently the S&P 500 Index has started to trend its way higher. In looking at the attached chart of the SPX.I, we see that SPX.I has broken above the early February high and onto new all-time high territory confirming the start of another advance. We may see resistance at the psychological 3000 area. If it happens to break above the 3000 level, the next area of resistance can be found at 3196.93. Support can be found at the 3-box reversal of 2675.05 and, below that, much stronger support at 2571.18. With an SMAX of 9 out of 10, the S&P 500 Index is showing near term strong against most asset classes.

iShares S&P 500 Value ETF (IVE) vs. iShares S&P 500 Growth ETF (IVW)

Now that we see the S&P 500 regain its footing and marching onto higher highs, let’s look at two major investment styles (Growth and Value) to see what has been the main driver for the S&P 500’s performance. The last time we looked at these investment themes was last September. We are going to be using the iShares S&P 500 Value ETF (IVE) vs. the iShares S&P 500 Growth ETF (IVW) in our analysis.

In looking at the comparison chart of the iShares S&P 500 Value ETF (IVE) vs. the iShares S&P 500 Growth ETF (IVW), we saw a structural change had occurred at the end of 2007. In the attached comparison chart, a rising column of X’s indicates Value stocks (IVE) had won the relative battle over Growth Stocks (IVW) and a descending column of O’s indicates Growth Stocks has won the relative battle over Value Stocks.

From the year 2000 to the end of 2007, we witnessed Value Stocks winning the relative battle over Growth Stocks (with the exception of a brief period in the spring of 2001 to the end of 2002 where there was a slight over performance from the growth stocks). However, since the beginning of 2008, Growth stocks has won the relative battle over Value. As you can see this outperformance in the Growth investment theme is still well intact up until today which marks over 10 years that this has been in play within the US Market. A vs. SMAX score of only 4 out of 10 potentially indicates further underperformance of in IVE vs. IVW and perhaps a further move down in the comparison chart which would favor Growth stocks moving forward.

It is important to remember, the comparison chart attached does not mean Value stocks are exhibiting overall market weakness. It is merely reflecting Growth oriented names have outperformed Value oriented names on a relative basis against each other.

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