Has Value Turned a Corner?

Here’s a look at the Vanguard Growth Fund (VIGRX) divided by the Vanguard Value Fund (VIVAX). I use these two mutual funds as proxies to see where we are in the growth-value cycle. When the line is rising, growth is leading and when it’s falling, value is leading.

The market was in a growth cycle from August 8, 2006 until April 13, 2012. Value has done well over the last nine months but I think it’s too early to say whether or not this is a multi-year trend. There have been more prominent breakdowns along the way so this could be just another.

Value generally does better when short-term rates are rising. Since rates are at 0%, and have been for a while, growth and value haven’t diverged that much. Once the Fed finally moves, this will probably change very quickly.

Posted by Eddy Elfenbein on January 30th, 2013 at 3:01 pm

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