In recent posts, we've seen how 2007 returns have varied widely as a function of sector and international market exposure. Now we turn to investment style, where we see equally dramatic differences in returns.
Here are year-to-date percentage returns for the i-Shares Russell 1000 (Large Cap) and 2000 (Small Cap) growth and value ETFs:
Large Cap Growth (IWF): 11.12%
Large Cap Value (IWD): -2.46%
Small Cap Growth (IWO): 4.70%
Small Cap Value (IWN): -12.69%
We can see that style has been the difference between quite a profitable year and quite a losing one. Large caps have handily outpaced small caps and growth has trounced value.
If we look at returns since the October market top, we see a similar pattern:
Large Cap Growth (IWF): -3.18%
Large Cap Value (IWD): -8.52%
Small Cap Growth (IWO): -9.01%
Small Cap Value (IWN): -13.01%
Here we can see that small caps and value are behaving as though we're in the midst of a bear market. Large caps and growth act more in a corrective mode. As the odds of recession have grown and credit concerns have not diminished, large cap growth has been a haven for those seeking stability and earnings. Even in the last week, the loss in large cap growth was less than half that in small cap value. Such a defensive mindset does not speak well for overall market sentiment.
Shift in the Style Box