Huge Disparity Between the Performances of Growth and Value Heading in to Earnings Season
Since the beginning of 2020, the S&P Growth Index has outperformed the S&P Value Index at every step of the way. Normally during a big market selloff, we would see growth stocks get hit harder than value stocks, but not this year. When the market went through its big selloff from February 19 through March 23, the SPDR S&P Growth ETF (NYSE: SPYG) dropped 31.27%. While that is a pretty sizable decline, the SPDR S&P Value ETF (NYSE: SPYV) fell 36.67%.
Even after the bounce off the lows, the growth index has outperformed the value index. Year to date (YTD), the growth fund is up 11.04% while the value fund is down 14.97%. Since the March 23 low, the growth fund is up 48.38% while the value fund is up 32.97%.
Sure, investment styles go in and out of favor all the time—one year value will perform better than growth and the next year we may see the opposite is true. For instance, in 2010, it was pretty close, but growth outperformed 16.24% to 15.48%. In 2011 growth managed a gain of 4.64% while value was down 0.72%. In 2012, value gained 17.22% and growth gained 14.19%. One of the closest races came in 2013 when growth gained 32.6% and value gained 31.76%.
Hopefully you are starting to see my point, but just in case you aren’t, in 2014 growth beat value out by 2.63%, and in 2o15 growth won again with a difference of 8.26%. Value won out in 2016 and the difference in returns was 10.23%. Growth won again in ’17 with a difference of 27.24% to 15.4%. Both funds lost ground in ’18, but growth lost 8.9% less. Value won out in another close race in 2019, 31.70% to 30.85%.
Looking at all of these past years we see that growth has outperformed value in the last 10 years. It’s been a historical bull market rally from the bear market that ended in early 2009, but look at the performance differences. The biggest disparity between the two styles came in 2017 when value was up almost 12% more than value.
Right now, so far in 2020, growth is up 11.04% and value is down almost 15% for a difference of 26%. That is an insane disparity between the two.
Monday, July 13, was an interesting day for the indices as all four of the main indices started out with significant gains, but selling hit the market in the afternoon and three of the four finished with significant losses. This date isn’t just a random date because it was the day before the second quarter earnings season was set to start.
Personally I took note of the fact that the SPDR Growth ETF dropped 1.62% on the day and the SPDR Value ETF gained 0.17%. This got my attention and I did a comparison between the two ETFs on the Tickeron platform. The thing that jumped out at me the most was how the most closely correlated stocks to each of the two funds performed on Monday. For the SPYG, seven of the 10 most correlated lost ground and there were a couple of big declines.
The opposite was true for the stocks most closely correlated to the SPYV. Eight of the 10 most highly correlated gained ground, one was unchanged, and one fell. Five of the 10 gained more than 1.0% on a day when the S&P itself was down almost 1.0%.
Obviously, one day’s returns don’t mean that a trend is changing, but the timing of the change caught my attention as the reversal in the main indices came just ahead of the earnings season.
I went back and looked at the 12-month returns of both the SPYG and the SPYV for the last 20 years. I took note of anytime where the growth fund beat the value fund by a substantial margin. Right now the 12-month return of the growth fund is 26% greater than the value fund and that is the biggest difference in the last 20 years.
Other times where growth outperformed value by more than 15% were very few, but they seemed to come at times where volatility increased—June ’08, December ’09, August ’11, and September ’18.
Based on these findings, I would advise investors to be cautious and prepare for a more volatile market in the second half of 2020.
Aroon Indicator for SPYG shows an upward move is likely
SPYG's Aroon Indicator triggered a bullish signal on December 26, 2024. Tickeron's A.I.dvisor detected that the AroonUp green line is above 70 while the AroonDown red line is below 30. When the up indicator moves above 70 and the down indicator remains below 30, it is a sign that the stock could be setting up for a bullish move. Traders may want to buy the stock or look to buy calls options. A.I.dvisor looked at 471 similar instances where the Aroon Indicator showed a similar pattern. In of the 471 cases, the stock moved higher in the days that followed. This puts the odds of a move higher at .
Technical Analysis (Indicators)
Bullish Trend Analysis
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where SPYG advanced for three days, in of 369 cases, the price rose further within the following month. The odds of a continued upward trend are .
Bearish Trend Analysis
The 10-day RSI Indicator for SPYG moved out of overbought territory on December 17, 2024. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 53 similar instances where the indicator moved out of overbought territory. In of the 53 cases, the stock moved lower in the following days. This puts the odds of a move lower at .
The Stochastic Oscillator may be shifting from an upward trend to a downward trend. In of 74 cases where SPYG's Stochastic Oscillator exited the overbought zone, the price fell further within the following month. The odds of a continued downward trend are .
The Momentum Indicator moved below the 0 level on December 27, 2024. You may want to consider selling the stock, shorting the stock, or exploring put options on SPYG as a result. In of 72 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
The Moving Average Convergence Divergence Histogram (MACD) for SPYG turned negative on December 18, 2024. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 46 similar instances when the indicator turned negative. In of the 46 cases the stock turned lower in the days that followed. This puts the odds of success at .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where SPYG declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
SPYG broke above its upper Bollinger Band on December 04, 2024. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
Notable companies
Industry description
Market Cap
High and low price notable news
Volume
Fundamental Analysis Ratings
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
General Information
Category LargeGrowth