Armed with a deep valuation advantage, value investing was then positioned for a run of its own. In that round, S&P 500 Value beat S&P 500 Growth for seven consecutive years (from 2000 to 2006) -- a margin of 8.5 percent annually in favor of value during the period.

Value’s newfound popularity squeezed the valuation gap between value and growth, and the spread in earnings yield between S&P 500 Value and S&P 500 Growth was a paltry 0.6 percent in 2006.

Then came round three and our melodrama took yet another turn. This time, presumably motivated by fear of a wounded economy rather than by dreams of high tech riches, investors chased growth yet again.

S&P 500 Growth beat S&P 500 Value seven out of nine years from 2007 to 2015, including the last three years, a margin of 4.2 percent annually in favor of growth during the period. The spread in earnings yield between S&P 500 Value and S&P 500 Growth now stands at 2.1 percent.

I leave it to you to decide what the next turn brings. But I think the unmistakable takeaway from the last two decades is that, despite the value premium’s widespread recognition and acceptance, the feud between growth and value is as hot-blooded as ever.

My guess is that investors will always find reasons to fear some corners of the market or to chase others, and as long as they do the value premium will persist. If you doubt that assertion, just look at distressed energy stocks, beaten down emerging markets or galloping unicorns.
 

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