Tech Sell-Off Triggers Market Reset: Value Stocks Reach 7-Month High Versus Growth

The U.S. stock market suffered the worst start to year in over two decades, with the S&P 500 and the Nasdaq 100 dropping 0.6% and 1.7%, respectively, on Tuesday.

This downturn was primarily instigated by a widespread sell-off in the technology sector, as investors adopted a more cautious stance following a robust market rally in the final two months of 2023.

Interestingly, not all segments of the equity market were equally affected by this early-year turbulence. Value-related stocks managed to weather the storm, avoiding losses and even posting modest gains during the first trading session of the year.

Notably, the iShares Core S&P U.S. Value ETF IUSV closed 0.6% higher on Jan. 2, reaching new all-time highs. On the flip side, the iShares Core S&P U.S. Growth ETF IUSG experienced a stark contrast, with a 1.6% decline on the same day. This performance left it trailing 13% below its previous record high, set in November 2021.

One noteworthy indicator that reflects the divergence between these two equity styles is the value-to-growth ratio, which measures the relative strength of value stocks compared to growth stocks. On the first trading day of the year, this ratio surged by 2.2%, marking its most robust single-day performance since October 2022 and reaching levels last seen in May 2023.

This demonstrates that after the strong tech-led rally in 2023, investors are reevaluating their preferences and potentially shifting towards value stocks as they seek stability and potentially undervalued opportunities in 2024.

Read also: A Beginner Guide To Value Investing

Value Stocks: Top Gainers

Top gainers among value-related stocks on Jan. 2 were:

• Moderna, Inc. MRNA: 13.12%
• Viatris Inc. VTRS: 5.17%
• Travel Leisure Co. TNL: 4.35%
• Las Vegas Sands Corp LVS: 4.31%
• Marriott Vacations Worldwide Corporation VAC: 4.26%

Top contributors to the iShares Core S&P U.S. Value ETF‘s performance were:

• Berkshire Hathaway Inc BRK: 1.63% (+5bp Contribution)
• Exxon Mobil Corporation XOM: 2.38% (+5bp Contribution)
• Johnson & Johnson JNJ: 2.06% (+4bp Contribution)
• UnitedHealth Group Incorporated UNH: 2.44% (+4bp Contribution)
• Merck & Co., Inc. MRK: 3.87% (+3bp Contribution).

Top contributors to the value performance in the last month:

• JPMorgan Chase & Co. JPM: Return: 20.57%, Contribution: +47bp
• Intel Corporation INTC: Return: 35.24%, Contribution: +31bp
• Bank of America Corporation BAC: Return: 27.98%, Contribution: +28bp
• Wells Fargo & Company WFC: Return: 25.65%, Contribution: +20bp
• Verizon Communications Inc. VZ: Return: 25.03%, Contribution: +18bp

Read now: Tech Titans Tumble: ‘Magnificent Seven’ Shed $250 Billion in Market Cap On 2024 Day One

Photo: Shutterstock