The stock market closed a bumpy week on a mixed note. Investors continue to wrestle with the countervailing factors of a strengthening U.S. economy and an inflationary environment that appears to be heating up. That led to mixed results from major market benchmarks, with the Dow Jones Industrial Average (DJINDICES:^DJI) moving higher even as the S&P 500 (SNPINDEX:^GSPC) eased lower and the Nasdaq Composite (NASDAQINDEX:^IXIC) gave up somewhat more ground.
On days like this, it’s always interesting to see what parts of the market were on the rise and which declined. Here, we’ll look more closely at the winners and losers on the day from a broad-based perspective.
Value beat growth
2020 was the year of growth stocks, with many defying conventional logic and rising even when the economy was going into a tailspin. However, that relationship has gotten turned on its head in 2021, and Friday was no exception.
The Vanguard Value ETF (NYSEMKT:VTV) tells the tale, with a rise of 0.3% easily topping the nearly 0.5% decline in its counterpart Vanguard Growth ETF (NYSEMKT:VUG). The disparity has been even more pronounced when you look back three months, with the value ETF climbing nearly 12% while the growth ETF has struggled to claw its way into positive territory.
Go back three years, and growth still has a commanding lead. But the signs currently suggest that the relationship is changing at least in the short run, and that could favor value stocks over growth stocks — especially if a more severe downturn is in the cards for the stock market.
Small beat large
When it comes to companies, size matters. Today, the iShares Russell 2000 ETF (NYSEMKT:IWM) managed to score a gain of nearly 0.4%, compared with the S&P 500’s flat to slightly lower performance on the day.
Small-cap outperformance extended a trend that has lasted for about the past six months, with the Russell outpacing the S&P by seven to eight percentage points. Small caps are more sensitive to economic pressures, especially domestically, and so prospects for the U.S. economy to reopen fully have bolstered small companies more than their larger counterparts. However, that also leaves small caps vulnerable to disappointment if the reopening doesn’t result in as big a surge in economic activity as hoped.
U.S. beat international
Finally, domestic stocks topped their international counterparts. The Vanguard Total Stock Market ETF (NYSEMKT:VTI) staying flat even as the Vanguard Total International Stock ETF (NASDAQ:VXUS) fell 0.3%.
In general, international stocks have tracked U.S. markets fairly closely as both have moved higher over the past year. However, it’s likely that we’ll start to see some disparities between countries that have had quick COVID-19 vaccine rollouts and those that have had to wait longer for vaccines to become available. That hasn’t showed up clearly in the numbers yet, but given enough time, investors are likely to see the effects appear.
Be ready for change
A lot of investors like to watch for trends and then follow them as long as they can. This often works well, especially when the trend proves to be long-lived.
However, trends almost always come to an end at some point. Being prepared for when that happens is essential to make sure you don’t lose your cool and get frustrated with an investing strategy that might suddenly seem to stop working temporarily.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.