Brief note on the Growth/Value Rotation.

I have been using the $QQQ / $IWN ratio to proxy the Large Growth and Small Value factors respectively.

Admittedly, these are imperfect proxies, as they conflate Growth/Value factors with Momentum/Anti-Momentum factors. https://twitter.com/bvddycorleone/status/1333199105951195139

As @profplum99 has noted, Growth & Momentum have become (temporary) partners, as have Value & Anti-Momentum.

Michael argued on Nov 24 (below) that the “value pop” was really just an anti-momentum pop, and that value itself barely budged. https://twitter.com/profplum99/status/1331298161013362689

And of course, he was right. At that point, it was the most negative-momentum names that were leading the pack higher.

I broadly confirmed Michael’s point, w/ the help of @wesj22, by looking at AQR’s Style Premia Fund, which is heavily exposed to Value. https://funds.aqr.com/funds/alternatives/aqr-style-premia-alternative-fund/qspix#

The AQR Style Premia Fund is a good retail proxy for isolating the Value factor (i.e. adjusting for the Anti-Momentum dynamic).

In line with Mike’s point, the fund did not perk up at all in November despite the apparent value pop.

...But that seems to be changing now.

Yesterday, after a nasty midday reversal in markets, $QQQ closed down over 200bps, while AQR’s Style Premia closed up 200bps:

HT @wesj22

Yesterday’s action might have marked the real beginning for the Value factor rotation and its outperformance of Growth.

If so, the party’s just getting started.

@profplum99 @hkuppy @biotequity @pineconemacro @hkuppy @Convertbond @jam_croissant @TihoBrkan @contrarian8888

Thoughts/feedback/criticisms always welcome and appreciated.