Value Stocks Hit 15-Month Low Against Growth As AI Fuels Tech's Vengeance Over 2022's Rate-Hike-Induced Market Fall

On Thursday, the ratio between the $Ishares Russell 1000 Value Etf(IWD.US)$ and the $Ishares Russell 1000 Growth ETF(IWF.US)$ fell to levels not seen since end-January 2022, thus illustrating a widening underperformance of value-oriented companies relative to growth ones.

What Explains the Performance This Year? Losses in the $Energy Select Sector SPDR Fund(XLE.US)$ , $Utilities Select Sector SPDR Fund(XLU.US)$ , $Financial Select Sector SPDR Fund(XLF.US)$ and $Real Estate Select Sector Spdr Fund (The)(XLRE.US)$ have weighed down the value-invested ETF.
- The value is also sharply underweighted in technology, consumer discretionary and communication services. The $The Technology Select Sector SPDR® Fund(XLK.US)$ , $Consumer Discretionary Select Sector SPDR Fund(XLY.US)$ and $The Communication Services Select Sector SPDR® Fund(XLC.US)$ have contributed the majority of the success in the growth-related ETF.
- Stock-wise, growth was pushed up by $Apple(AAPL.US)$ , which added alone 3.9 percentage points to the ETF's performance year to date; $Microsoft(MSFT.US)$ added 3.8ppt; $NVIDIA(NVDA.US)$ added 2.7ppt; and $Alphabet-C(GOOG.US)$ $Alphabet-A(GOOGL.US)$ added 2ppt. Therefore, the strong rally in AI-related stocks sharply favored the growth universe of the market.
- $Meta Platforms(META.US)$ was the main stock contributor for the value ETF in 2023, but despite an impressive 110% return this year, it only provided 1.3ppt to the IWD's performance due to its modest 2.5% weight in the portfolio.
- $Pfizer(PFE.US)$ , $Johnson & Johnson(JNJ.US)$ , $Chevron(CVX.US)$ and $Bank of America(BAC.US)$ have been the main negative contributors to the performance of value in 2023.