We have looked at this aspect in some detail in this blog when we assessed different asset classes in the past several months. In this article, we look at the market behavior from last week and compare value vs growth again.
The difference in returns from the three Vanguard funds are noted below for the past one week.
Comparison of VUG, VV and VTV
Typically, increasing interest rates causes the dividend yielding stocks to be less attractive. The stocks with high growth are better preferred. Since the value stocks have a fair degree of exposure to dividend paying stocks, for the week, the VTV lagged VUG by a small margin.
This is a trend I will be watching closely in this blog in the next several months.
The value funds have done well for the past few years on the back of high energy prices and the housing boom. A difference of one or one and a half percentage points between the two funds is made up by the value fund in terms of dividends.
However, the pattern may be changing with money flowing into the tech sector. So far, we have seen only a handful of tech companies benefit by this trend - Google, Apple and Amazon are the ones that come to mind. Since these stocks are already in the stratosphere in terms of valuation, the rally hasnt been very broad.
Overall the U.S and global economy seems to be in good shape and corporate earnings should continue to do well in the second half of the year. This bodes well for SP500 average in general and the broader stock market in particular.