The second half of the year could bring about a bullish move for both value and growth stocks according to Todd Rosenbluth, the head of research at VettaFi. He believes that value stocks, which have historically lagged behind growth stocks, may see a positive upswing thanks to the FTSE Russell’s annual rebalancing event.
The recent annual reconstitution of the Russell indexes highlighted the disparity between growth and value stocks. While the iShares Russell 1000 Growth ETF has surged by 20% this year, the iShares Russell 1000 Value ETF has only managed to gain almost 6%. This imbalance suggests an opportunity for value stocks to see increased interest and potentially outperform growth stocks in the near future.
Rosenbluth emphasizes the importance of incorporating both growth and value stocks into a diversified portfolio. While the current market sentiment is tilted towards growth, there is a historical precedent for value stocks to make a comeback. By balancing exposure to both styles of investing, investors can position themselves to benefit from any potential market shifts.
FTSE Russell CEO Fiona Bassett acknowledges the cyclical nature of the market and the role that indices play in providing exposure to different investment styles. The ability to tailor investment strategies to focus on either value or growth stocks allows investors to align their portfolios with their risk tolerance and market expectations.
As of May 31, the top holdings of the Russell 1000 Growth ETF include tech giants like Microsoft, Apple, and Nvidia. On the other hand, the top holdings of the Russell 1000 Value ETF feature established names such as Berkshire Hathaway, JPMorgan Chase, and Exxon Mobil. These differences in composition reflect the contrasting characteristics of growth and value stocks, highlighting the potential for diversification in an investment portfolio.
The second half of the year holds promising prospects for value stocks to rally and potentially outperform growth stocks. By staying attuned to market dynamics, diversifying investment strategies, and focusing on top holdings, investors can position themselves for success in an evolving market environment.