Russell 1000 Value Closes The Gap

The Russell 1000 Value index is up 18.3% this year, through yesterday’s close, while the Russell 1000 Growth index is down 3.6%. The 21.9-percentage-point gap is the largest of the year. Value has spent nearly the entire year in positive territory and has continued higher since Spring lows. Growth fell 13% by the end of March, recovered to a gain of nearly 9% on June 1, and has since given all of that rebound back, and some.

Value’s 21.9-point advantage is its largest through this point in the year since at least 1991, surpassing the 17-point lead from 1993. If the year ended today, the spread would also be the second-largest full-year advantage for Value over that span. Only in 2000, when Value beat Growth by more than 27 percentage points, as the Dot-Com Bubble began to unwind, was the gap wider.

Zooming out to the current bull market tells a different story. Since the Russell 1000 bottomed on October 12, 2022, Growth has gained 118.8%, compared with 81.8% for Value. Growth still leads by 37 percentage points despite its recent pullback. That gap was considerably wider at the Russell 1000’s June 1 peak, when Growth was up 147% from the 2022 low versus 72.9% for Value. The rotation since then has cut Growth’s advantage nearly in half.

Growth’s advantage in this bull market fits the broader historical pattern. It outperformed Value during nine of the eleven bull markets since 1998. Across those periods, Growth gained an average of 88.0%, compared with 60.5% for Value. The difference is even wider using median returns, at 91.4% for Growth and 50.6% for Value. The two exceptions were the July 2002–October 2007 bull market, when Value led by 19 points, and the March 2009–April 2011 advance, when it led by less than three points.

Bear markets have generally been more favorable to Value. Value outperformed during six of the ten bear markets shown, falling an average of 25.7% versus a 30.8% decline for Growth. The largest separation came during the first leg of the Dot-Com bust from September 2000 through April 2001, when Growth plunged 48.3% while Value declined just 6.0%. More recently, Value fell 18.6% during the 2022 bear market, compared with a 31.8% drop for Growth.

Value has made a meaningful dent in Growth’s bull-market lead, but it hasn’t erased it. An investor who bought Growth at the October 2022 low is still ahead of a Value investor by 37 percentage points, even after one of Value’s strongest starts to a year in more than three decades.