Value stocks are poised for further upside relative to the S&P 500. As a result, we are building positions in lagging sectors such as financials and energy. Consumer discretionary and small-caps are also improving relative to the overall market, where we will increase exposure throughout Q4.
The chart below shows the iShares S&P 500 value ETF (IVE) holding support relative to the iShares S&P 500 growth ETF (IVW) over the past few months. This supports a rotation out of growth sectors such as tech and communications and into value. Further, we expect the current market pullback will give way to seasonal strength in November, albeit with greater dispersion of returns on the stock and sector level.
Value vs. Growth