One of the most reliable gauges of sentiment in the stock market is where growth stocks trade relative to value stocks, since any given extreme can signal above-average optimism or pessimism, creating opportunities for investors to ride a return to balance. Toda’s market appears to be driven by extreme optimism, prompting investors to delve deeper into identifying value and potential upside.
By charting the iShares S&P 500 Value ETF (NYSEARCA: IVE) against the iShares S&P 500 Growth ETF (NYSEARCA: IVW), investors can clearly see that value stocks have fallen behind by a wide margin, in fact, the widest margin over the past decade. Chances are that a big “catch-up” play may happen soon, triggering a rotation back into these forgotten high-quality businesses.
