Growth Has Been on a Roll – What Lies Ahead?

September 19, 2017 | posted in: Blog, LPL Weekly Market Commentary | by

According to LPL Research, “Growth has been on a roll. Based on the Russell 3000 style indexes, growth’s 18% year-to-date gain is 14% ahead of value’s 4% advance. Looking further back, this growth outperformance is nothing new. Over the past 10 years, including the entire financial crisis period of 2008 and 2009, growth has outpaced value by about 50%, representing the longest period of growth outperformance since style indexes began to gain a following about 40 years ago. Using Fama-French* data back to the 1930s, before the Russell indexes were created, this is the longest bull market ever for growth stocks. Due to this observation setting off contrarian alarm bells in our heads, this week we discuss the potential for a value rebound.”

Key takeaways:

Growth stock valuations appear rich; its run may be poised to pause or reverse.

Economic growth is improving, which tends to favor value.

Technical analysis suggests that the growth rally may be overextended.

Read more from LPL Financial’s Burt White, Chief Investment Officer, and Jeffrey Buchbinder, CFA Market Strategist.