This past weekend I was reviewing columns from one year ago, as I do from time to time. I do so in order to remember what I was thinking at the time, to see what has worked and what has not, and to learn something. Last year at this time, the pandemic was still somewhat new, but markets were already starting to recover, beneficiaries of the B-12 shot of low interest rates and massive stimulus and because there was hope for a vaccine in fairly short order.
Early on, it was large-caps, and particularly large-cap growth stocks, that were getting all the attention. As I noted in my May 4, 2020 column, at the time the S&P 500 was down just 12.4% year to date. It had recovered a remarkable 27% off of its March 23 bottom and was off to the races.
Smaller name were far behind, with the Russell 2000 Index (down 24.4%) and Russell Microcap Index (down 24.6%) trailing the S&P 500 by 1,200 basis points or more. However, it was value that was really struggling. At the time, the Russell 2000 Value Index (down 30.7%) and Russell Microcap Value Index (down 31%) were both solidly in bear market territory. Value was dead yet again, or at least that was the theory.
Fast forward one year and both smaller names and value have turned the tables on large-caps and growth. Since last May, small- and micro-caps are trouncing their larger cousins, with the Russell 2000 and Russell Microcap Indexes up 81.9% and 99.1%, respectively, versus a 43.6% increase for the S&P 500. During that same time frame, the Russell 2000 Value (up 86.6%) and Russell Microcap Value (up 101.7%) indices beat the Russell 2000 Growth (up 75.5%) and Russell Microcap Growth (up 99.1%) indices.
Year to date in 2021, the Russell 2000 Value (up 23.6%) and Russell Microcap Value (up 30.9%) are ahead of their growth counterparts by 1,646 basis points and 1,504 basis points, respectively. Value is still behind in the three-, five- and 10-year periods but has made some inroads over the past year.
I can't tell you the number of times I've heard the phrase, "Value is dead." I know of some value managers who were on the cusp of believing that very notion during the 2000-era tech bubble madness but held on for brighter days.
How long this resurgence will last is anyone's guess, but it just goes to show you that styles still fall in and out of favor. Call it a reversion to the mean if you'd like, but it's good to see value getting some attention.