Today's, we address the current debate between growth and value stocks.
Downward price action over the last two months resulted in many relative strength changes, but among the first to occur were between value and growth. In early March, the Large Cap Growth group fell behind the Large Cap Value group within Asset Class Group Scores for the first multiday period since the start of 2023. Meanwhile, the RS chart between the Vanguard Value ETF (VTV) over the Vanguard Growth ETF (VUG) reversed into a column of Xs in favor of value. While the reversal acted as a near-term sign of weakness from growth, the relationship still favored growth in the long-term given the strength it earned over the previous two years. Since those initial changes, the market underwent further downside action before swiftly returning to its pre-April levels. Given the movement, should we prefer growth or value stocks when evaluating large caps?
Growth segments saw greater downside relative to the market last month, but the recovery of the group also outpaced most areas of the market. The VTV vs VUG relative strength matchup still favors value in the near-term, but several signs point towards relative improvement within growth in the last few weeks. The US Large Cap Growth group currently holds an average score of 3.46, which is a quarter of a point higher than the US Large Cap Value group—the widest lead in favor of either group since February. The overall score of both groups remains below strong territory above 4.0, but it’s still an encouraging development for growth stocks.
Those two groups can provide insight into the broader large cap space, but some investors may only be interested in the S&P 500 (SPX). We can look at the iShares S&P 500 Growth ETF (IVW) and iShares S&P 500 Value ETF (IVE) as more precise SPX representatives. Looking at their charts, IVW maintained its positive trend and long-term market RS despite its pullback. Meanwhile, IVE lacks long-term market RS and just flipped its trend back to positive last week. Comparing their fund scores, IWM’s 4.65 score is far greater than IVE’s 2.66 score, thanks in part to the long-term strength growth stocks have displayed.
Underneath the hood of the market, there’s more developments to support the relative improvement of growth stocks. The bullish percent for large cap growth stocks (^BPLCG) is at 81%—up from 12% at its April low—for its highest levels since early 2023. Value stocks have also improved notably, but the bullish percent for large cap value (^BPLCV) sits at a more muted 62%, in addition to improving far less than the growth group. While both groups have rebounded, the improvement within growth stocks has been more broad based than that of value stocks. Growth may have trouble moving its bullish percent above current elevated levels, but more stocks contributing to the upside is still a positive overall. While the growth stocks aren’t as strong as they were entering 2025, they’ve shown enough improvement to place them further ahead of value compared to the last couple months, especially when focusing on large cap equities.
