- While the work-at-home play led to ongoing Growth outperformance through mid-July, the market then fell into more level relative style and size performance until the early vaccine test results were announced just after the election (November 9th, to be exact).
- While this caused a quick and severe rotation into value, that rotation proved short-lived. The more meaningful and enduring result was greater speculative behavior, evidenced by the steady outperformance of the Russell 2000 Index (red line). This trend of small-cap outperformance persisted for 3 months, through February 9th.
- After close on 2/9, we see the sharp value rotation. The Russell 2500 Value (yellow line) would outperform the Russell 2500 Growth (orange line) by 18% during the ensuing month. During this period, small cap outperformance abated, and the Russell 2000 traded roughly in line with the Russell 2500 Index.
- From close 3/8 through close 4/26, the Value rotation paused and in fact slightly reversed. The Russell 2500 Growth outperformed the Russell 2500 Value by about 5% during this period, and the Russell 2000 underperformed by almost 3%.
- From close 4/26 through close 5/10, Value stocks recorded another 10% edge relative to Growth; however, small-caps slightly underperformed.
Arguably, then, there’ve been two recovery trades since the vaccine test results were announced:
- An early, more speculative phase dominated by smaller, more volatile stocks.
- A second, economic data-driven phase of Value stock outperformance (which has resumed after a consolidation period).
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