Thanks to a confluence of factors, Value stocks have significantly outpaced their Growth peers year-to-date, with the Russell 1000 Value up 16.3% versus 11.2% for the year. But the performance gap between Value and Growth has been closing since its 10.3% spread at the end of the first quarter of 2021.
So what factors were driving value’s outperformance? After a huge pandemic-related run-up in 2020, growth stock valuations were pretty lofty. As investors positioned for the new year, value stocks started rallying in the 4th quarter of 2020 and into the first quarter of 2021. The COVID-19-driven lockdowns had an unprecedented impact on the global economy and investors sought value in cyclical stocks, such as energy, ﬁnancials, retail and other beaten-down segments of the economy. For a disciplined value investor, it was an opportunity to deploy capital to good companies trading below their historical norms.
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