Value Versus Growth

The market is rolling again today. The Dow broke 11850 and the S&P 500 is closing in on 1350. I’ve mentioned before that this is one of few market rallies I can think of where the market’s P/E ratio has declined as the rally has wore on. Not only that, the market”s dividend yield has climbed as well. In other words, as well as stocks are doing, profits and dividends are growing faster.
There’s something else interesting to note which is probably related. Value stocks have led growth stocks during this rally. Looking at the relative performance of growth versus value is a basic sentiment indicator. Growth tends to cream value during market tops, and vice versa during market bottoms.
This rally may not be over. Here’s how growth and value have done since March 2003:

Growth has closed the gap some over the last two months.

Posted by Eddy Elfenbein on October 4th, 2006 at 3:45 pm

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