Value short-term, Growth long-term

There’s been much debate about whether growth or value stocks will outperform over the next few years. You have people arguing that growth’s valuations are ‘too high’ while others argue that we’re in a hyper-growth phase for innovation. Luckily, I’m a technician and don’t need to make assumptions. I just follow the price action.

Since this post in Feb, I’ve been making the case for value stocks in the short-term, but for growth to take the lead again after. I continue to think this way, and there’s 3 main charts to show why. Let’s take a look.

US vs. Canada

The chart below shows that the S&P 500 is heavily concentrated in growth sectors while Canada’s TSX composite is heavily concentrated in value sectors.

Source: www.spglobal.com, June 5th 2021.

SPX/TSX, Monthly. This growth/value ratio can retest the former ‘99 highs, which is 7% below.

US Growth vs. Value

NDX/SPX, Monthly. Similar to the above chart, this ratio can retest the former ‘00 highs, which is 5% below.

MSCI Growth/Value, Monthly. 50yr base support is 7% below.

All three charts above are giving a consistent message: that growth stocks have just a little bit more downside relative to value before hitting major support, where they likely resume leadership.


Important DisclaimerThis blog is for educational purposes only. I am not a financial advisor and nothing I post is investment advice. The securities I discuss are considered highly risky so do your own due diligence.