US growth vs value styles - Growth outperformed by +5.8%
US cyclical vs defensive sectors - Defensives outperformed by +7.9%
EU vs US regions - EU outperformed US by +2.0%
US small vs large caps - Small caps outperformed large caps by +4.7%
IntroHere we monitor different pockets of the US equity market to discover current insights on investor sentiment, atittude and behaviours.
Growth vs ValueGrowth stocks are those of companies that are considered to have the potential to outperform the overall market over time because of their future potential. Value stocks are classified as companies that are currently trading below what they are really worth and will thus provide a superior return.
In the chart above we are monitoring which equity style, relative to the other, has been more popular for investors in different periods. If growth wins, we assume that investors are betting on faster future growth, a more positive market sentiment and eventually lower interest rates to come. If value wins, we assume that investors show growth worries, negative sentiment on uncertainties and perhaps higher interest rates.
Cyclical vs Defensive sectorsCyclical sectors are industries whose performance is closely tied to the overall state of the economy. They tend to thrive during economic expansions and struggle during contractions. Common examples include consumer discretionary (non-essential goods and services), financials, industrials, basic materials and technology.
Similarly to the above, cyclical sector stocks win in times of business expansion and positive sentiment. Defensive sector stocks win in times of uncertainty and slow-down in growth.
EU vs US regional stocksWe compare regional performance in the US and EU equities, one against the other, to spot which region has been better performing, and thus preferred by investors over certain periods, but we also treat Europe as a more value-oriented play (because of the number of value stockstraded vs growth in Europe) and we treat US as a growth-oriented play (because of the number of growth stocks relative to value in US).
US or EU regions will overperform depending on ad-hoc regional drivers and context, but - same things equal - we can think that Europe will outperform in a context of global uncertainties or slow-down (as value) while the US will outperform in case of fast growth (but also in recessions eventually, given the role of the USD as shield in case of major growth-driven turmoil).
Large vs small capsBecause of their business size and internationalization, large-cap stocks (=stocks with high market capitalization, like Coca Cola) tend to be considered lower risk, but they also have fewer opportunities for growth. Small caps stocks (=smaller businesses with smaller market capitalization) have more room for growth, but they may struggle to raise additional financing or expand during recessions.
Large vs small caps relative performance shares insights on where we are in the economic cycle. Large caps tend to outperform in the peak and maturity phases of the economic cycle, while small caps tend to outperform earlier in the cycle when moving to early growth and acceleration, ahead of peak.