The relationship between value and growth has been under the microscope over the last month. Growth has picked up strength throughout the first three months of the year while value has moved in the opposite direction.

The relationship between value and growth has been under the microscope over the last month. Growth has picked up strength throughout the first three months of the year while value has moved in the opposite direction. Earlier in the year, value still held a substantial lead over growth while growth enjoyed a strong January which led the All Growth Funds group on the Asset Class Group Scores page back near a score of 3.0 for the first time since January 2022. Recently, value lost much of its score lead as the All Value Funds group dropped from an average score reading in the mid-3s to the low-3s. This led to a change in leadership between the All Value Funds and All Growth Funds groups for the first time since January 2022 as growth narrowly took back leadership last week. The two groups are still very close in score to one another, so more separation is needed to confirm the leadership change. However, this is a major shift that will impact asset allocation if it does hold. Over the period the All Value Fund group scored higher than the All Growth Funds group (1/4/2022 – 3/23/2023) the Vanguard Value ETF (VTV) outperformed the Vanguard Growth ETF (VUG) by 13.11%.

Using these two groups to rotate between VTV and VUG has been a strong strategy going back to November 2003. The strategy is simple, if the All Value Funds group scores higher than the All Growth Funds group, then the strategy owns VTV and vice versa. Benchmarked against just holding VTV or VUG, the strategy grew $100 to $618.74 while just holding VTV resulted in an ending value of $300.36 and VUG resulted in an ending value of $513.76. As we can see in the image below, the rotating strategy was able to stick with VUG over the last decade as growth was favored until switching to value last year. This switch led the strategy to separate itself from just owning VUG by a wide margin. While the two groups are still scoring close to each other, leadership changes between value and growth should be taken genuinely.