Style Divergence Between Large Caps and Mid/Small

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If you’ve been following the stock market over the past decade or so, you may know that growth stocks have been on a tear, outperforming their value counterparts in what has been an extended bull market. Lately, however, the dynamics of the growth-versus-value battle have shifted significantly. Year-to-date in 2021, growth stocks have outperformed handily in the large cap space, but the reverse has been true in small and mid-caps. And it’s no small difference.

G vs v 112021

Digging into the data within each size cohort, we found that the outperformance by growth or value has been based off two sectors: Financials and Information Technology. The Russell Top 200 Growth Index largely outperformed the Russell Top 200 Value Index because of the weighting and performance of Technology (largest sector in Growth) and Financials (largest sector in Value). Top 200 companies within these two sectors have had significant pull within the Russell 1000 (large caps) and Russell 3000, but are excluded entirely from the Russell Midcap, Russell 2000, and Russell Microcap indices. Not surprisingly, the growth-over-value trend is also absent from mid and small caps. Going forward, we believe this trend will create pockets of opportunity throughout the market cap spectrum. We also think investors should pay close attention to already-stretched valuations and favor quality stocks with good businesses models, whether they are growth or value oriented.

Growth vs value spectrum tables
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Although the information in this report has been obtained from sources that the firm believes to be reliable, we do not guarantee its accuracy, and any such information may be incomplete or condensed. All opinions included in this report constitute the firm’s judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Russell Top 200® Index measures the performance of the 200 largest companies in the Russell 1000® Index. Russell Top 200® Growth Index is designed to track those securities within the broader Russell Top 200 Index that FTSE Russell has determined exhibit growth characteristics. Russell Top 200® Value Index is designed to track those securities within the broader Russell Top 200 Index that FTSE Russell has determined exhibit value characteristics.

Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000® Index, which represents approximately 89% of the total market capitalization of the Russell 3000 Index. Russell 1000® Growth Index is designed to track those securities within the broader Russell 1000 Index that FTSE Russell has determined exhibit growth characteristics. Russell 1000® Value Index is designed to track those securities within the broader Russell 1000 Index that FTSE Russell has determined exhibit value characteristics.

Russell 3000 Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market. The Russell 3000 Index is constructed to provide a comprehensive, unbiased and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are reflected. Russell 3000® Growth Index is designed to track those securities within the broader Russell 3000 Index that FTSE Russell has determined exhibit growth characteristics. Russell 3000® Value Index is designed to track those securities within the broader Russell 3000 Index that FTSE Russell has determined exhibit value characteristics.

Russell MidCap® Index is a market-capitalization-weighted index representing the smallest 800 companies in the Russell 1000 Index. Russell MidCap® Growth Index is designed to track those securities within the broader Russell MidCap Index that FTSE Russell has determined exhibit growth characteristics. Russell MidCap® Value Index is designed to track those securities within the broader Russell MidCap Index that FTSE Russell has determined exhibit value characteristics.

Russell 2000®Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 11% of the total market capitalization of the Russell 3000® Index. Russell 2000® Growth Index is designed to track those securities within the broader Russell 2000 Index that FTSE Russell has determined exhibit growth characteristics. Russell 2000® Value Index is designed to track those securities within the broader Russell 2000 Index that FTSE Russell has determined exhibit value characteristics.

Russell Microcap Index measures the performance of the 1,000 smallest companies in the Russell 2000® Index. Russell Microcap Growth Index is designed to track those securities within the broader Russell 2000 Index that FTSE Russell has determined exhibit growth characteristics. Russell Microcap Value Index is designed to track those securities within the broader Russell 2000 Index that FTSE Russell has determined exhibit value characteristics.

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