The iShares Russell 1000 Growth ETF (ticker: IWF) is down 3 percent in 2020, while the iShares Russell 1000 Value ETF (ticker: IWD) is down 20 percent. During 2019, iShares Russell 1000 Growth ETF returned nearly 36 percent, topping its value counterpart by nearly 10 percentage points. The Speaker observed that it is rare to see such strong outperformance during both rising and falling markets, especially as relative earnings is no longer providing support.
Source: Minack Advisors
A participant noted that every component of FANG (Facebook, Amazon, Netflix, and Google) is stronger because of the coronavirus pandemic.
“With 95 percent of Americans ordered to stay at home, FANG stocks are like consumer staples now. Their businesses have benefited and that could be why tech is acting defensive as well.” He said it would be interesting to see how the Speaker’s chart would look if it showed relative sales instead of earnings. These firms are sacrificing profits for greater revenues and scale.
Historically, growth stocks have performed best in a slow-growth economy, whereas value stocks have outperformed when the economy is running on all cylinders. Should the unprecedented stimulus lead to a robust recovery once the pandemic is over, could value stocks make a comeback?