“Style Box” Update – Is Growth / Momentum Investing Moving Out of Favor ?

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The President didn’t help the Growth/FAANG/Momentum crowd this morning with his tweets targeted at Amazon.

Looking at the above table, as of this weekend, it looks like Growth is maintaining its “alpha” over Value, although large-cap is seeing less of a premium than small-cap.

However, what is somewhat deceptive about that data, is the January ’18 style was very similar to 2017’s out-performance, the worm has started to turn in the last 60 days.

Let’s use two examples, the SP 500 Growth ETF (IVW) versus the small-cap value ETF (IJS):

Let’s also look at 1-month as well as Q1 ’18 returns:

IVW: SP 500 Growth ETF

  • 3-month return: +1.81%
  • 1-month return: -2.97%

IJS: SmallCap Value ETF 

  • 3-month return: -1.44%
  • 1-month return: +1.37%

While not perfectly negatively correlated, there does seem to be some negative correlation.

Coming into 2018, some Tech and Q’s were sold and some IJS bought just from a “reversion to the mean” perspective, after tech and large-cap growth were up around 30% in 2017.

As the 2nd quarter starts, look for Tech/Growth/FAANG/Momentum to lose that performance premium and look for both the smaller-caps and Value to start to close the performance gap.

Note for the 12/31/17 column, the performance premium Growth held over Value for the full-year 2017. It was less dramatic in the mid and smallcap, but the premium was there.

The SP 500 is testing its 200-day moving average today. The February 9th, 2018 opening low for the SP 500 was 2.532.69 – that’s your line in the sand.

Thanks for reading…


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