Despite recent hints of a comeback for value-oriented US stocks, growth still firmly leads value across various market caps and time periods. In fact, US large-caps in the Russell 1000 Growth Index have outperformed US large-caps in the Russell 1000 Value Index during 2019 by 7%. And for US small-caps, the Russell 2000 Growth Index has outperformed the Russell 2000 Value Index by 2.6%.
However, defensive-oriented stocks continue to lead their more cyclical, dynamic-oriented counterparts in the US when examined through the lens of the Russell Defensive & Dynamic Indexes—both indexes show defensive-oriented stocks as a key driver among both large and small caps. The Russell 1000 Defensive Index has returned 19.8% in 2019 as compared to a 14.6% return for its Dynamic counterpart. And the Russell 2000 Defensive Index has returned 14.5% in 2019 as compared to a 6.3% return for the Russell 2000 Dynamic Index.
Alec Young, managing director, global markets research, FTSE Russell:
"Several macroeconomic drivers have been fueling the strong outperformance of defensive stocks over their cyclical counterparts across the market cap spectrum. The biggest has been widespread fears of slowing global growth, which has only been exacerbated by seemingly endless US-China trade tensions. This has led companies in defensive, counter-cyclical businesses to lead more economically sensitive stocks.
In addition, worries about the health of the global economy have driven interest rates to record lows around the world. Given that companies in defensive sectors like utilities, consumer goods, telecommunications and real estate generally sport higher dividend yields than their cyclical counterparts, falling interest rates have also helped drive defensive stock leadership.
Investors looking for cues on better cyclical stock performance may want to focus on the outlook for global growth and the direction of long term interest rates. If confidence in a US-China trade breakthrough improves and interest rates head higher it’s logical to assume cyclical stock performance may become more competitive."
Catherine Yoshimoto, director, product management, FTSE Russell:
"More sophisticated index tools and market data from FTSE Russell can provide further insight into key drivers in the global equity markets. Whether looking at market capitalization, investment styles, market factors or, in this case, defensive and cyclical (dynamic) stock performance during periods of heightened volatility, investors can benefit from having a more nuanced lens into how the equity markets are moving."
For more information about the Russell US Indexes, go to the FTSE Russell website.
*Index returns as of October 8, 2019
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