Tuesday, May 13, 2008

Index Comparisons

In my last market update (see here), I looked at some long term trends in markets that I believe will continue. In this post, I will take a look at some shorter term trends. One of the cycles we try to take advantage of is the difference in performance between the growth and value styles. These trends tend to persist for 5-7 years. Right now, we are in a growth cycle. This chart shows the performance of IVV (IShares S&P 500, black line), IVE (IShares S&P 500 Value, brown line) and IVW (IShares S&P 500 Growth, blue line) over the last year. As you can see the growth index is clearly outperforming. This is true over a two year period as well.

This chart shows a similar chart of the Russell 2000, a small cap index. Again the index is in black, value in brown, growth in blue:

This trend extends to the EAFE index as well:

These trends have been in place for about two years now and if history is a guide, they will likely persist for another few years.

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