A number of ingredients created a catalyst for a decline in equity prices in January and February as well as a further drop in energy prices. The S&P 500 Energy Index hit a low point for the year on January 20th while broader equity benchmarks closed lower in early February. The outperformance of energy stocks during the period shown in Figure 4 helped push value stocks over growth on a year-to-date view as shown in Figure 5.
While it is challenging to specifically identify the type of environment where value will outperform growth (and vice versa), it is clear there are definable periods in history with substantial dispersions in both directions. The current “phase” has been in play for over two years with particular reasons as discussed earlier. The trend may continue for the near future, but the recent divergence in returns may signal a turning of the tide.