Value vs. Growth Perspective

November was a quasi-historic month for the broad market (best month for the Dow since ’87) and for value/cyclical sectors more broadly, but while I think that value can outperform over the longer term going forward, I continue to think the rotation to value should be focused on creating a more balanced value/growth portfolio, and not abandoning growth/tech all at once.




The simple logic behind that is that while value may outperform growth over the longer term now, because of massive stimulus, 0% rates and an end to the pandemic, tech also can do well. To help reinforce that point, I want to point out some return numbers (for reference I used the price return of VTV for value and VUG for growth):

  • In November, value outperformed growth handily, 12.9% to 7.9%.

  • Over the past three months (so since Aug. 31) value has handily outperformed growth, 6.4% to 2.1%.

  • But on a year-to-date basis, growth is massively outperforming value, 33.6% to -3.6%.


Here are two takeaways from this observation:

  • First, if you are still very overweight growth, don’t be upset. Sure they lagged in November, and since the summer, but look at the YTD difference.

  • Second, there’s still a very large performance gap between growth and value on longer-term time horizons. We think that over the longer term, that gap can close, which is why we advocate a rotation to value now.

  • But unlike many other financial advisors, I think growth can still trade higher with the market, and the that while growth/tech may lag going forward, it’s still produced stellar YTD returns and certainly demands the benefit of the doubt (which is again why I advocate a measured rotation into value and reduction in and tech overweight’s).


Bottom line, if the market is going to rally over the longer term, value should outperform because that rally will be driven by an economic growth rebound that’s fueled by QE, 0% rates, stimulus and no pandemic. However, that’s still an environment where tech can rally too (especially super-cap tech), so there’s no need to stampede out of growth even if value can outperform.