The Takeaway
The margin of outperformance for US large growth versus its value counterpart was highest of the size segments, as Nvidia, Apple, Microsoft, and Amazon.com continue to push the growth indexes higher. In emerging markets, value outperformed growth for 12 of the last 16 quarters.
Apple was a notable addition to the Value Indexes suite, while Samsung Electronics was added to the Emerging Markets Growth Index.
Valuation spreads between growth and value stocks, measured by P/E (trailing 12 months) increased over the past quarter. As of June, the growth-value P/E spread was in the top quintile of historical distributions for all size bands and regions.
For the last few quarters, two topics dominated the narrative for the equity markets: expectation of Fed rate cuts and AI. Despite the step-down in the number of rate cuts for 2024, for the second quarter of 2024, the US markets returned 3.32% as the demand for AI and better-than-expected earnings overshadowed the higher-than-expected inflation. Under the hood, Big Tech drove the majority of the returns again. Not surprisingly, in the US, large-cap growth was the best-performing segment, delivering 11.30% returns for the latest quarter. Outside of the US, emerging markets (positive 5.05% return) outperformed the developed markets ex-US (negative 0.45% return), and emerging-markets value was the best-performing segment, returning a solid 5.35% for the latest quarter.
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