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Index IDEA: Growth versus value performance has hinged on the FAANGs

New analysis from global index provider FTSE Russell illustrates the important role that the five so-called FAANG stocks, i.e. Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Google (GOOG), have played in growth’s leadership over value. The research also helps explain the recent July resurgence of value relative to growth-oriented US equities.

As shown in the chart below, US large cap growth stocks have outperformed their value counterparts in the last year, with a slight pullback in July. This parallels how FAANG stocks have performed relative to the broad Russell 1000® large cap equity index for the same time period.

Alec Young – managing director, Global Markets Research, FTSE Russell

“While the Russell 1000 Growth Index’s 12.8% YTD total return still soundly leads the Russell 1000 Value’s 2.7% gain[1], growth’s leadership stalled recently as FAANG stocks leadership eased. The Russell 1000 Growth Index was up only 2.9% in July versus a larger 4% gain for the Russell 1000 Value Index. Sector weightings can help explain the ebbs and flows in style performance. Take the Technology and Consumer Discretionary sectors, 2018’s two best sector performers and home to all the FAANG stocks—the Russell 1000 Growth Index’s combined Technology and Consumer Discretionary sector weighting is 59%, which is much larger than the Russell 1000 Value Index’s comparable sector weighting of 18%. The biggest drivers of growth’s YTD leadership, as well as its July stumble, are its much larger exposures to the Technology and Consumer Discretionary sectors, both of which underperformed the Russell 1000 Index in July after leading in the first half of the year.”

For more information on US equity indexes from FTSE Russell, go to the FTSE Russell website.

 

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[1] Source: FTSE Russell and Thomson Reuters. Data as of August 6, 2018. One cannot invest in an index. Past performance is no guarantee of future results. Please see the end for important legal disclosures. Views expressed by Alec Young of FTSE Russell are as of August 10 and subject to change. These views do not necessarily reflect the opinion of FTSE Russell or the LSE Group.

 

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