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Growth vs. Value Market Cycles Then and Now
About this video
Near-term growth drivers are important but it’s helpful to know what long-term trends and patterns are impacting the stock market. The growth vs. value cycle is a recognized long-term market pattern. The problem for investors is that the present can be as distracting as the past when drawing actionable conclusions.
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Growth vs. Value Market Cycles Then and Now

Successful investing requires attention to detail – but sometimes it also helps to take a step back and look at market trends and cycles.

The growth vs. value style cycle is a recognized and “discussed” long-term cycle in the equities market. However, "discussion” does not always lead to understanding. Bear in mind, past performance, is not a guarantee of future results.

Direction or distraction? Let’s take a look.

Growth has outperformed value over the past 5 years as of December 31st, 2018, with most of that outperformance occurring over the past 2 years.

We saw a similar disparity between growth stocks and value stocks at the end of 1999. Here is a look at both 5-year periods side by side. In addition to the similar percentage spread with growth outperforming value, much of the outperformance in both instances occurred toward the end of each 5-year period.

Let’s also view how the growth vs. value investment cycle played out starting in 2000.

Here is a 5-year chart starting in the year 2000. The first 3 years of the 2000s saw a clear reversal of the growth vs. value market cycle with value providing relative downside protection from a broad market correction. You can see that the Russell 1000 Value Index turned positive by the end of the fourth year, while growth remained deep in negative territory.

Fast forward to 10 years and the returns stayed like the 5-year chart — partially thanks to the great recession of 2008. Growth returns remained negative throughout the 10-year period.

Finally, let’s look at the entire time period we’ve discussed — a 25-year look back as of December 31st, 2018. This period covers what we consider to be a full market cycle. Despite including two periods of strong outperformance by growth stocks, total returns over this 25-year period are very similar.

Here is a look at the growth vs. value market cycle going back to 1944. This chart shows the rolling 5-year spread between growth and value over the past 75 years.

Which leads us to make some general comments about interpreting market cycles. Direction or distraction? Or is it recency bias?

Recency bias is the tendency to think that what’s been happening lately will keep happening. Recency Bias can cause investors to stay in stocks or other instruments because they have been performing well, despite warning signs like historical or relative high valuation.

That’s not to say that present flashes can’t be reliable signals, but we believe it’s more prudent to also consider longer-term cycles and market performance. We think you will agree, as do most investment professionals, that it is important to understand your investments, create a long-term plan, and to stay the course with your long-term goals and objectives.

Don’t let market distractions steer you away from long-term success.

© 2019 Miller/Howard Investments, Inc.

Investment products: are not FDIC insured - May lose value - Are not bank guaranteed

Opinions and estimates offered constitute Miller/Howard Investments' judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. All investments carry a certain degree of risk, including possible loss of principal. It is important to note that there are risks inherent in any investment and there can be no assurance that any asset class will provide positive performance over any period of time. The material may also contain forward-looking statements that involve risk and uncertainty, and there is no guarantee they will come to pass.

The information above is from sources deemed to be reliable and is provided strictly for the convenience of our investors and their advisors. These materials are solely informational. Legal, accounting and tax restrictions, transaction costs, and changes to any assumptions may significantly affect the economics of any transaction. The information and analyses contained herein are not intended as tax, legal, or investment advice and may not be suitable for your specific circumstances; accordingly, you should consult your own tax, legal, investment, or other advisors, at both the outset of any transaction and on an ongoing basis, to determine such suitability. Any investment returns — past, hypothetical, or otherwise — are not indicative of future performance. Investment Decisions: Do not use this report as the sole basis for investment decisions. Do not select an allocation, investment discipline, or investment manager based on performance alone. Consider, in addition to performance results, other relevant information about each investment manager, as well as matters such as your investment objectives, risk tolerance, and investment time horizon.

Past performance does not guarantee future results.

DISCLOSURE

Investment products: are not FDIC insured - May lose value - Are not bank guaranteed

Opinions and estimates offered constitute Miller/Howard Investments' judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. All investments carry a certain degree of risk, including possible loss of principal. It is important to note that there are risks inherent in any investment and there can be no assurance that any asset class will provide positive performance over any period of time. The material may also contain forward-looking statements that involve risk and uncertainty, and there is no guarantee they will come to pass.

The information above is from sources deemed to be reliable and is provided strictly for the convenience of our investors and their advisors. These materials are solely informational. Legal, accounting and tax restrictions, transaction costs, and changes to any assumptions may significantly affect the economics of any transaction. The information and analyses contained herein are not intended as tax, legal, or investment advice and may not be suitable for your specific circumstances; accordingly, you should consult your own tax, legal, investment, or other advisors, at both the outset of any transaction and on an ongoing basis, to determine such suitability. Any investment returns — past, hypothetical, or otherwise — are not indicative of future performance. Investment Decisions: Do not use this report as the sole basis for investment decisions. Do not select an allocation, investment discipline, or investment manager based on performance alone. Consider, in addition to performance results, other relevant information about each investment manager, as well as matters such as your investment objectives, risk tolerance, and investment time horizon.

Past performance does not guarantee future results.