SOURCE: Russell Investments

Russell Investments

April 23, 2014 15:46 ET

Style Gap: Performance Gap Between Russell 1000® Growth & Russell 1000® Value Indexes Has Widened in 2014 a/o April 21 After a Less Than 1% Difference in 2013

SEATTLE, WA--(Marketwired - Apr 23, 2014) - Much attention has been given recently to the narrow gap between growth- and value-oriented U.S. large cap stocks in 2013, as reflected by the Russell 1000® Growth and Russell 1000® Value Index. 2013 saw a narrow return gap of 0.9% between these two indexes, only the second time in the last 20 years the two indexes had an annual return difference less than 1% (the previous instance was in 2003).

The growth/value gap has widened in 2014 year-to-date performance as of April 21, with the Russell 1000 Value Index (3.2%) outperforming the Russell 1000 Growth Index (0.7%) by 2.5%.

As shown in the chart below, looking at annual returns for the 20-year period from 1994-2013, the differentiation between U.S. large-cap growth and value index returns has ranged from 0.3% in 2003, a year in which both indexes saw returns of approximately 30%, to as wide as 29% in 2000.

In the six years after 2003, the last time the return gap between U.S. large-cap growth and value stocks was less than 1%, the annual return differences between growth and value widened significantly, with a double-digit difference in four of the six years.

"While of course no one can predict the future for the markets, historical analysis through market indexes can provide clues as to factors which drove markets over time," said David Koenig, CFA, FRM, index investment strategist for Russell Investments. "More precise index tools help investors dig below the surface of broad market performance into shifting style and sector leadership, to gain greater insight into potential factors which have historically driven the market. Observing the growth / value gap as it widens and narrows over time can help underscore the potential benefits of style diversification in a multi-asset portfolio."

For more information on the Russell growth and value indexes including a new research study by Koenig entitled "Value? Growth? Or Both," go to the Russell Indexes website.

The Russell Global Index measures the performance of the global equity market based on all investable equity securities, and is constructed to provide a comprehensive and unbiased barometer for the global segment, The Index includes more than 10,000 securities in 47 countries, and covers 98% of the investable global market. All securities in the Russell Global Index are classified according to size, region, country and sector; as a result the index can be segmented into more than 300 distinct benchmarks.

Please note: Indexes are unmanaged and cannot be invested in directly. Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment. Russell's publication of the Indexes or Index constituents in no way suggests or implies a representation or opinion by Russell as to the attractiveness of investing in a particular security. Inclusion of a security in an Index is not a promotion, sponsorship or endorsement of a security by Russell and Russell makes no representation, warranty or guarantee with respect to the performance of any security included in a Russell Index.

Opinions expressed by Mr. Koenig reflect market performance as of April 21, 2014 and are subject to change at any time based on market or other conditions without notice. Past performance does not guarantee future performance.

This material is not an offer, solicitation or recommendation to purchase any security.

Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional. The information, analysis and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual entity.

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Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide, including Russell Investments, and is a subsidiary of The Northwestern Mutual Life Insurance Company.