US Value Stocks Trail Growth Stocks By An Alarming 8% In 2023: Why Is The Value Style Underperforming Again?
The first four and a half months of 2023 have been broadly positive so far for U.S. stocks, with the S&P 500 index, which is closely tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY), gaining 8%.
Significant performance differences have emerged across sectors and styles, with value stocks largely underperforming against growth stocks.
The iShares Core S&P Growth ETF (NASDAQ:IUSG) rose 11.5% so far this year, while the iShares Core S&P Value ETF (NASDAQ:IUSV) by only 3.4%, generating an 8% performance gap between value and growth stocks.
Up until the beginning of March, there was little difference in performance between the two major equity styles, but since the regional banking crisis erupted with the failures of Silicon Valley Bank and Signature Bank, value stocks have been substantially underperforming growth ones.
Benzinga looked at the main industries and companies that have contributed to the value underperformance relative to growth in 2023.
Chart: Regional Banking Crisis Widened Value Vs. Growth Gap In 2023
What Is Driving The Value's Underperformance Vs. Growth In 2023: Key Takeaways
- The major reason why value lagged growth in 2023 was due to the performance of bank stocks.
- The large relative overweights in technology and semiconductor industries, fuelled gains in growth-related stocks.
- A declining inflation and rising expectations of lower interest rates also favored growth stocks, while weighing more on value on a relative basis.
Key Stocks And Sectors Driving Value Vs. Growth Performance
- Bank of America Corp. (NYSE:BAC) is the main negative contributor to the overall performance of the iShares Core S&P Value ETF, dragging alone 0.23%.
- CVS Health Corp. (NYSE:CVS) and Charles Schwab (NYSE:SCHW) are the second and third biggest drags on value performance, pushing the IUSV ETF down by 0.2 and 0.1%, respectively.
- The large weight of the Financial Select Sector SPDR Fund (NYSE:XLF), (20%) in the value index, produced a significant overall drag of about 1.3%.
- Apple Inc (NASDAQ:AAPL) is the top contributor to the overall performance of the iShares Core S&P Growth ETF, adding alone 3.6%. The stock has a weight of 13.15% in the IUSG ETF, while it's absent in the value portolio.
- Microsoft Corp. (NASDAQ:MSFT) and NVIDIA Corp. (NASDAQ:NVDA) are the second and third-best contributors to the growth performance, adding 3.6% jointly.
- Growth stocks in the Technology Select Sector SPDR Fund (NYSE:XLK) and the Communication Services Select Sector SPDR Fund (NYSE:XLC) added 10% to the overall performance of the IUSG portfolio year to date. These two sectors alone account for 40% of the total holdings of the growth ETF.
- Bank stocks have a negligible weight of about 0.15% in the growth ETF's portfolio.
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