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'Style Box' Update - Is Growth / Momentum Investing Moving Out Of Favor?

Apr. 02, 2018 10:33 PM ETSPY, IVW, IJS6 Comments
Brian Gilmartin, CFA profile picture
Brian Gilmartin, CFA

The President didn't help the Growth/FAANG/Momentum crowd this morning with his tweets targeted at Amazon (AMZN).

Looking at the above table, as of this weekend, it looks like Growth is maintaining its "alpha" over Value, although large-cap is seeing less of a premium than small-cap.

However, what is somewhat deceptive about that data, is the January '18 style was very similar to 2017's out-performance, the worm has started to turn in the last 60 days.

Let's use two examples, the S&P 500 Growth ETF (IVW) versus the small-cap value ETF (IJS):

Let's also look at 1-month as well as Q1 '18 returns:

IVW: S&P 500 Growth ETF

  • 3-month return: +1.81%
  • 1-month return: -2.97%

IJS: SmallCap Value ETF

  • 3-month return: -1.44%
  • 1-month return: +1.37%

While not perfectly negatively correlated, there does seem to be some negative correlation.

Coming into 2018, some Tech and Qs were sold and some IJS bought just from a "reversion to the mean" perspective, after tech and large-cap growth were up around 30% in 2017.

As the 2nd quarter starts, look for Tech/Growth/FAANG/Momentum to lose that performance premium and look for both the smaller-caps and Value to start to close the performance gap.

Note for the 12/31/17 column, the performance premium Growth held over Value for the full-year 2017. It was less dramatic in the mid- and small cap, but the premium was there.

The S&P 500 is testing its 200-day moving average today. The February 9th, 2018, opening low for the S&P 500 was 2.532.69 - that's your line in the sand.

Thanks for reading…

This article was written by

Brian Gilmartin, CFA profile picture
Brian Gilmartin, is a portfolio manager at Trinity Asset Management, a firm he founded in May, 1995, catering to individual investors and institutions that werent getting the attention and service deserved, from larger firms. Brian started in the business as a fixed-income / credit analyst, with a Chicago broker-dealer, and then worked at Stein Roe & Farnham in Chicago, from 1992 - 1995, before striking out on his own and managing equity and balanced accounts for clients. Brian has a BSBA (Finance) from Xavier University, Cincinnati, Ohio, (1982) and an MBA (Finance) from Loyola University, Chicago, January, 1985. The CFA was awarded in 1994. Brian has been fortunate enough to write for the TheStreet.com from 2000 to 2012, and then the WallStreet AllStars from August 2011, to Spring, 2012. Brian also wrote for Minyanville.com, and has been quoted in numerous publications including the Wall Street Journal.

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