Many market commentators are clamoring over the recent performance of markets as they respond to positive vaccine news and clarity around the outcome of our presidential election. These events have driven stock markets higher, notably small value stocks. Using Russell index data, we’ve seen small value companies rise 23.6% from October 1 through November 30, while large growth stocks have risen by 6.5%. 1  This outperformance of small value by 17.1% over such a short period has commentators suggesting a larger market rotation may be occurring, or that perhaps this is a conformational signal that a sustained economic recovery is taking hold.

While we won’t speculate on market commentary, we do want to reinforce that this performance is not unusual. While small value stocks have struggled in recent years, a longer perspective reveals that small value stocks have been outperforming quite regularly throughout market history. Consider this: since 1963, the year that small company stock data started being recorded, small value stocks have outperformed large growth stocks in 79% of 10-year periods, and outperformed by an average of 204%. If we lengthen this window to 15-year periods, we see that small value stocks historically outperformed in 89% of these periods by an average of 616%. 2 

So, yes, we’ve seen strong recent performance from small value stocks, which is very welcome for our client portfolios. Let's not call it a comeback however, since small value investors have been outperforming quite regularly for many years now.

  1. Large Growth – Russell 1000 Growth TR USD, Small Value – Russell 2000 Value TR USD for the time period of 10/1/20 through 11/30/20.
  2. Data from Ken French:

NOTE: The information provided in this video is intended for clients of Carlson Capital Management. We recommend that individuals consult with a professional advisor familiar with their particular situation for advice concerning specific investment, accounting, tax, and legal matters before taking any action.