As the year progresses, there is a possibility of a bullish move for both value and growth stocks in the finance market. Todd Rosenbluth, the head of research at VettaFi, believes that value stocks, which have historically been market laggards, could experience a positive change due to the FTSE Russell’s annual rebalancing event. This rebalancing could potentially shift the tide in favor of value stocks, which have long been overshadowed by growth stocks.
During the recent annual reconstitution of the Russell indexes, changes were made to reflect the evolving market landscape as companies grow and adapt. The iShares Russell 1000 Growth ETF has shown a significant increase of 20% year-to-date, while the iShares Russell 1000 Value ETF has experienced a more modest rise of almost 6%. This disparity in performance highlights the current preference for growth stocks over value stocks.
Despite the current dominance of growth stocks, Rosenbluth suggests that there is still value in having a balanced portfolio that includes both growth and value stocks. While investors may be more inclined towards growth stocks in the second half of the year, there is a possibility that the pendulum could swing back in favor of value stocks, presenting new opportunities for investors.
Fiona Bassett, the CEO of FTSE Russell, emphasized that the indices are designed to reflect the dynamic nature of the market. The Russell franchise offers various indices that cater to different investment preferences, allowing investors to focus on either value or growth stocks based on their investment strategy. This flexibility provides investors with the option to tailor their portfolios to suit their risk appetite and investment goals.
According to FactSet data as of May 31, the top three holdings of the Russell 1000 Growth ETF include Microsoft, Apple, and Nvidia. On the other hand, the top holdings of the Russell 1000 Value ETF consist of Berkshire Hathaway, JPMorgan Chase, and Exxon Mobil. These holdings reflect the contrasting nature of growth and value stocks, with technology companies dominating the growth ETF and financial and energy companies leading the value ETF.
The finance market is poised for a potential shift in the second half of the year, with value stocks possibly gaining traction alongside growth stocks. Investors should remain vigilant and consider the opportunities presented by both value and growth stocks when structuring their investment portfolios.