According to new data from global index provider FTSE Russell, total return for the Russell 1000 and Russell 2000 Value Indexes surpassed the Russell 1000 and Russell 2000 Growth Indexes in the past three months.1 In a recent webinar, FTSE Russell examined the surge in Value and discussed whether this shift is sustainable. Some key highlights are outlined below.
After underperforming globally for the past 14 years, Value’s outperformance in November 2020 was robust, buoyed by the development of COVID-19 vaccines and a potential return to economic normalcy.
Recent Value outperformance was propelled by its exposures to long-lagging cyclical sectors like financials and oil & gas, which are most likely to benefit from a post-pandemic economic recovery.
Mark Barnes, head of investment research, Americas, FTSE Russell:
Global economic recovery spurred by the vaccine rollout may support Value in the short run, but FTSE Russell research looking back at 60 years of the US market found that Value tends to perform best when the economic outlook is positive and yields are rising. To have a sustained rotation into Value, we’ll need higher expected economic growth and normalization of monetary policy. If a pick-up in growth expectation pushes US bond yields back up to 2019’s 2% level, it could increase the odds of a structural shift in Value’s performance.
Bob Hum, head of iShares factor ETFs, BlackRock:
Investors looking to build a strong portfolio can benefit from style diversification and gaining exposure to US styles through the efficient ETF vehicle.
Footnote 1:
© 2021 London Stock Exchange Group plc and its applicable group undertakings (the “LSE Group”). The LSE Group includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE Global Debt Capital Markets Inc. and FTSE Global Debt Capital Markets Limited (together, “FTSE Canada”), (4) MTSNext Limited (“MTSNext”), (5) Mergent, Inc. (“Mergent”), (6) FTSE Fixed Income LLC (“FTSE FI”), (7) The Yield Book Inc (“YB”) and (8) Beyond Ratings S.A.S. (“BR”). All rights reserved.
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Views expressed by Mark Barnes of FTSE Russell are as of February 4 and subject to change. These views do not necessarily reflect the opinion of FTSE Russell or the LSE Group.
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