After the longest run of outperformance of growth over value stocks ever, we believe value may be poised for a comeback. Year to date as of 6/11/2018, the Russell 1000 Growth Index has returned 9.5%, compared with just 0.5% for the Russell 1000 Value Index. As our LPL Chart of the Day shows, over the past 10 years, including the 2008–09 financial crisis, large cap growth stocks have outperformed value stocks consistently and significantly— by about 80 percentage points on a total return basis.

How much longer can this outperformance continue?

According to LPL Research Chief Investment Strategist John Lynch, “Generally, value stocks benefit from an economic growth tailwind, whereas growth stocks tend to be more in favor when the growth potential they offer is scarce.  Although the timing of a turnaround is difficult to predict, we expect modest outperformance of value stocks over the balance of the year, supported by accelerating economic growth, attractive relative valuations, and potentially better financials sector performance.”

Check out our Weekly Market Commentary for more insights on growth and value stocks.

 

IMPORTANT DISCLOSURES

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.

The Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.  Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. Value investments can perform differently from the market as a whole.  They can remain undervalued by the market for long periods of time

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