- Value stocks have retained their lead over growth stocks for the past year across U.S. and international markets alike.
- Growth stocks rebounded from the spring to the summer in U.S. large caps—and, to a lesser extent, in small cap and international developed markets—but essentially ran out of fuel at the end of the summer.
- Value stocks have actually become less expensive in 2021 on a forward price-to-earnings basis as their earnings expectations improved. This has driven the valuation spread between value and growth back to the historic extreme that existed prior to the rotation to value that began on November 9.
It’s been 12 months since “Pfizer Monday” (November 9, 2020, when Pfizer announced the development of the first successful COVID-19 vaccine). This date became the inflection point of value-oriented stocks’ return to favor versus growth amid a broad recovery rally.
How has the value rotation played out around the world?
Unevenly, to say the least. Exhibit 1 shows clear divides between U.S. and international stocks, as well as between more efficient market segments (like U.S. large caps and developed markets, which have more trading activity, higher liquidity, and better analyst coverage of companies and trends) versus less efficient segments (like U.S. small caps and emerging markets).
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