Since the start of last year, there has been ample discussion regarding the value factor’s resurgence against the growth factor. Indeed, many value-oriented exchange traded have easily outpaced the S&P 500 for a year now while the comparable growth ETFs have lagged the broader market.
In fact, many growth ETFs have been bleeding assets while investors flock to value funds. However, the iShares S&P 500 Growth ETF (NYSEArca: IVW) is an example of a growth ETF investors should monitor, particularly as the technology sector prints new highs. IVE is up nearly 19% over the past year and currently resides near all-time highs.
Value stocks typically trade at cheaper prices relative to fundamental measures of value, such as earnings and the book value of assets. In contrast, growth stocks tend to run at higher valuations since investors expect the rapid growth in those company measures.
Investors are typically more aggressive during periods of heightened volatility and would chase popular growth stocks. Since growth stocks show high multiples, investors may expect that the companies will sustain a high growth rate. In contrast, traders may feel that firms with low multiples would continue to experience tepid growth. However, the value style came into focus last year after a bout of heightened market volatility and lingering global uncertainty pushed investors away from riskier high-growth stocks.