The gap between value and growth stocks has significantly decreased this year, with Invesco’s pure-style ETFs demonstrating just how much ground value has made up after trailing growth for some time now.
The Invesco S&P 500 Pure Value ETF (RPV) has gained about 19.50% % year to date through August, according to ETF Database. The Invesco S&P 500 Pure Growth ETF (RPG) is up roughly 19.67 % over the same period. This leaves RPG with a slight advantage, but the margin is much smaller than during past periods that saw growth stocks dominating the market.
Key Takeaways
- The gap is closing: Value (RPV) is rapidly catching up to Growth (RPG) this year.
- Expected Fed rate hikes are boosting value’s momentum over growth.
- Despite similar returns, RPV holds a broad mix while RPG relies heavily on tech.
This narrowing performance gap is something investors should keep an eye on, especially since markets and major banks expect the Federal Reserve to raise interest rates by 25 basis points this week.
In recent years, growth stocks have benefited from a number of trends, particularly the strong performance of large technology companies. At the same time, they can be sensitive to interest rate changes because their expected earnings lie further in the future.
Conversely, value stocks can benefit from a different rate environment. S&P Dow Jones Indices has noted that value stocks historically perform better during periods of rising interest rates.
RPV’s Momentum
While the interest rate outlook remains uncertain, recent moves in Treasury yields have also shown how quickly expectations can change.
With that said, recent performance suggests that the value trade may have more momentum than it did previously. The Dow Jones U.S. Large-Cap Value Index was up 18.5% year-to-date through August 21, while the broader growth index had gained 9.51% over the same period.
RPV also takes a more focused approach to the value factor than a traditional value ETF. The fund tracks the S&P 500 Pure Value Index, which focuses on the 100 companies from the S&P 500 with the strongest value features, rather than simply dividing the index into value and growth stocks.
RPG may still be winning when it comes to pure-style matchup, but the margin has narrowed significantly.
Top Holdings
The difference between RPG and RPV is also evident in their top holdings. RPG is more concentrated in higher-growth areas in the market, with holdings in SanDisk (SNDK), Micron Technology (MU), and CrowdStrike (CRWD).
This gives the fund heavier exposure towards technology, semiconductors, and companies benefiting from continued spending around AI and data center infrastructure.
For RPV, its largest holdings include names such as Centene (CNC), Bunge Global (BG), Humana (HUM), and Target (TGT). The fund is also more spread out at the top, with its largest positions making up a smaller share of its portfolio than RPG’s biggest holdings.
The difference in their holdings and exposures is worth keeping in mind as the growth-value race gets tighter. This means that while RPV has made considerable ground on RPG, the two funds are still making very different bets on where gains will come from next in the market.
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Invesco Distributors, Inc. is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Invesco Distributors, Inc., nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles.
