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What Drives The Rotation Between Growth And Value?

Conventional wisdom says that value does best at the beginning of bull markets, while growth outperforms as the bull market matures.

Interestingly, the correlation of monthly percent changes in both the growth/value and tech/financials relative strengths generates a coefficient of 73%. What’s more, the correlation between monthly price changes in the 10 S&P 500 sectors offers another suggestion that Financials and Tech play a fairly dominant role in the movement of the growth/value relative strength. 

S&P 500

The S&P 500 Growth Index has outperformed the S&P 500 Value Index in 16 of the last 26 calendar years (62%), and in 8 of the past 9 years (89%). While reversion to the mean implies that it will just be a matter time until value is again in the driver’s seat, current price momentum and S&P STARS rankings indicate that the growth index will likely remain behind the wheel for the time being.

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