The Takeaway
Growth led only among US mega-caps, while value led almost everywhere else. Large technology names helped US mega-cap growth stocks outpace value by about 6 percentage points, but value led in most other segments. The Morningstar Global Value Target Market Exposure Index was the best-performing style index, and the Morningstar Emerging Markets Growth Target Market Exposure Index was the weakest.
Growth indexes remained far more top-heavy than value indexes. The 10 largest holdings made up nearly two-thirds of the Morningstar US Mega Cap Growth Index and more than half of the Morningstar Emerging Markets Growth Target Market Exposure Index, at least double their value counterparts. Developed markets outside the US stayed the most diversified, and concentration changed little over the quarter.
Growth's valuation premium eased in several markets but remained stretched in US mid-caps. The growth-value P/E spread narrowed sharply in emerging markets, moving close to its historical norm, and narrowed in US small caps and developed markets outside the US. In the US mid-cap segment, where spreads have historically been the strongest signal of future growth-versus-value returns, growth is trading at a high premium to value.
A tale of two styles: US mega-cap growth rallied while value swept international markets
Beginning with this edition, the US analysis uses the Morningstar Market Indexes, formerly the CRSP Market Indexes, replacing the Morningstar US Broad Style Indexes used in previous editions. The new coverage provides style comparisons across the US core-cap, mega-cap, mid-cap, and small-cap segments.
Style leadership diverged across US size segments in the third quarter of 2026. Growth outperformed value in the Morningstar US Core Cap and Mega Cap indexes, with mega-cap growth leading its value counterpart by 6.44 percentage points. In contrast, value regained the lead in US mid- and small caps after growth had outperformed across all US size segments in the second quarter. Growth was also more volatile than value across every US size segment, while concentration was particularly pronounced among mega-cap growth stocks, whose 10 largest holdings represented 64.58% of the index.
Outside the US, value held the advantage. The Morningstar Global Value Target Market Exposure Index returned 4.11%, the highest among the global style indexes, while value outperformed growth by 5.59 percentage points in developed markets ex-US and 7.75 percentage points in emerging markets. Growth indexes were more volatile than their value counterparts across these markets as well.
Growth also remained more concentrated, particularly in emerging markets, where the 10 largest holdings represented 55.71% of the growth index compared with 24.18% of the value index. Developed markets ex-US remained considerably more diversified, with the top 10 accounting for 19.63% of growth and 14.06% of value.
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