Many investors have heard of the “value premium”—the idea that cheaper stocks have outperformed growth stocks over time. But over the last 10 years, value stocks have underperformed growth stocks by an average of 2.5% annually. Experts attribute the superior performance of the latter to the increased investor appetite for risk and a demand for strong earnings in the face of sluggish economic growth.
At the beginning of 2016, value began making a modest comeback, with the market rotating away from high-growth, momentum names toward defensive, high-dividend-yielding and deep-value cyclical companies. As of mid-May, the growth component of the Russell 1000 index was up 0.13%, while the value component had risen 2.67%.