Wall Street’s Rotation Into Value Has a Dot-Com Warning to It

Core Viewpoint - The recent slump in US technology stocks has led to a relative strength in value stocks, with a consensus on Wall Street that this shift is just beginning [1][2]. Group 1: Performance of Value vs. Growth Stocks - The Russell 1000 Value Index (RLV) has increased by 8.6% from early November to Tuesday, outperforming its growth counterpart by 14 percentage points [1]. - Historical instances of such outperformance have typically resulted in further gains for value stocks compared to growth stocks [1]. - Despite the recent outperformance, the value and growth dynamic is only back to neutral on a rolling 52-week basis [6]. Group 2: Market Sentiment and Strategic Shifts - Wall Street strategists are warning that the era of Big Tech dominance may be nearing its end, as evidenced by a selloff in tech shares following a rout in software makers [2]. - There is a growing sentiment among analysts, such as CFRA's Sam Stovall, that the large cap-growth trade feels outdated, with value stocks continuing to outperform [3][4]. - Ned Davis Research's Ed Clissold is advising clients to adopt a "value tilt" over growth stocks, indicating a strategic shift in investment focus [4]. Group 3: Long-term Trends and Future Outlook - Value stocks have been underperforming for over a decade, particularly as technology has driven bull market runs [5]. - Analysts like Andrew Greenebaum from Jefferies suggest that the rotation towards value stocks may just be starting, with significant room for outperformance compared to growth stocks [4]. - Historically, "pro-value" periods have seen outperformance exceeding 10%, indicating potential for future gains in value stocks [6].