‘This is not a flash in the pan’: Why value stocks are beating growth by such a wide margin

Value stocks — shares of companies trading below their on-paper value — are putting up big gains this year that widely surpass growth equities, with investors appearing optimistic about earnings growth broadening beyond technology.

The investor motivation behind value’s biggest outperformance in years appears to be an increased comfort in the strength of the U.S. economy, a view that garnered support from strong May jobs data out last week.

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‘This is not a flash in the pan’: Why value stocks are beating growth by such a wide margin

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The Russell 1000 Value Index RLV has jumped 14.8% this year through Friday, beating the Russell 1000 Growth Index’s RLG much smaller gain of 2.7% over the same period, FactSet data show. That left the value index on track for its largest outperformance in the first half of a year since 2022, according to Dow Jones Market Data.

Value stocks outperformed on Friday, with growth equities — those issued by companies ringing up better-than-average sales and earnings increases — nearly flat, even as the S&P 500 index rose 0.5% and SpaceX’s stock SPCX surged 19% in its first day of trading following its record-setting initial public offering. Investors may be rotating into areas of the stock market that are sensitive to economic growth, benefiting value-oriented sectors even as the artificial-intelligence trade still seems to appeal to traders.

“We’re actually pretty optimistic about the returns for value stocks,” said Dave Grecsek, director of investment strategy at wealth-management firm Aspiriant, in a phone interview. “We’re starting to open up a window here where these value-style businesses can get back to generating better earnings growth.