Value Stock Rotation Analysis: Growth Signals Amid 14% Outperformance Since November

The current value stock rotation represents one of the most significant shifts in market leadership in over two decades. According to the Seeking Alpha analysis [1], the Russell 1000 Value Index has outperformed the Russell 1000 Growth Index by approximately 14 percentage points since November 2025—the largest gap observed since the early 2000s. This magnitude of outperformance is historically noteworthy because such substantial rotations have typically preceded either major economic regime changes or significant market corrections.

The market data reveals a clear divergence between growth-oriented and value-oriented indices over the trailing 30-day period [0]:

Index/Instrument	30-Day Performance	Growth/Value Orientation
NASDAQ Composite	-2.33%	Growth-heavy (technology)
S&P 500	+0.25%	Mixed
Dow Jones Industrial	+2.67%	Value-oriented
Russell 2000	+3.38%	Value/small-cap
Vanguard Value ETF (VTV)	+0.56%	Pure value exposure
Vanguard Growth ETF (VUG)	-1.28%	Pure growth exposure

This divergence is particularly striking given that the value-oriented indices have generated solid positive returns while growth-heavy indices have experienced meaningful declines [0]. The rotation is not merely a tactical adjustment but represents a fundamental shift in market leadership that warrants close monitoring.

The sector-level data provides additional confirmation of the value rotation thesis and offers insights into the underlying economic drivers [0]. The strongest-performing sectors over the trailing 30-day period have been economically-sensitive, capital-intensive industries that traditionally benefit from improving economic conditions:

• Basic Materials:
  +1.35%
  (best performer)
• Financial Services:
  +0.93%
• Energy:
  +0.89%
• Healthcare:
  +0.25%

• Technology:
  -2.00%
  (worst performer)
• Consumer Cyclical:
  -1.31%
• Communication Services:
  -0.37%

The concentration of gains in Basic Materials, Financial Services, and Energy sectors aligns with expectations of improving economic growth rather than imminent recession [0]. These sectors are traditionally sensitive to industrial activity, interest rates, and consumer spending patterns, making them leading indicators of economic momentum. The simultaneous weakness in Technology—a sector that had dominated market performance for years—suggests investors are reallocating capital away from high-multiple, long-duration growth assets toward more reasonably-valued segments positioned for near-term earnings acceleration.

The real-time quote data reveals a significant valuation gap that may be driving the rotation [0]:

Metric	VTV (Value)	VUG (Growth)	Differential
P/E Ratio	21.55x	35.81x	Growth trades at 66% premium
EPS (TTM)	$9.45	$13.05	Growth has higher absolute earnings
Price	$203.60	$467.37	-

The growth ETF (VUG) trades at a

to the value ETF (VTV) on a price-to-earnings basis [0]. This substantial valuation differential indicates that growth multiples had become extended relative to historical norms and relative to the value segment. The rotation appears to reflect technical selling pressure in overextended growth positions as investors reallocate to more reasonably-valued segments of the market.

The valuation analysis suggests this rotation is fundamentally different from past instances where value outperformance preceded bear markets. In previous cycles, value often rallied as a defensive response to deteriorating earnings expectations across the market. The current rotation appears driven by valuation normalization—the compression of excessive growth multiples—rather than fundamental earnings deterioration in either segment [1].

The Seeking Alpha analysis [1] establishes critical historical context for evaluating the current value-growth dynamic:

Period	Value-Growth Dynamic	Performance Gap
2015-2020	Growth dominated	+8-12% to growth
2020-2021	Value rally during COVID recovery	~7% to value
2022-2023	Value recovery post-rate shock	+12% to value
Nov 2025-Feb 2026	Current rotation	+14% to value

The current 14% gap represents the most significant value outperformance since the early 2000s [1], suggesting this is not a minor tactical rotation but a potentially structural shift in market leadership. However, the critical question is whether this rotation, like those preceding the 2008 bear market, signals imminent contraction, or whether it reflects a fundamentally different economic environment.

The macroeconomic backdrop provides compelling evidence that the current environment is distinguishable from pre-bear-market conditions [1]:

Indicator	Current (2025-26)	2008 Crisis	Implication
GDP Growth	2.3%	1.7%	Current environment stronger
Inflation	3.5% YoY	6.2% (2007-08)	Inflation more contained
Unemployment	3.9%	10% (2009 peak)	Labor market substantially stronger
Fed Funds Rate	4.75%	5.5-6%	Monetary policy less restrictive
Consumer Sentiment	68	54 (2008-09)	Consumers more optimistic
Service PMI	53.8	50.2 (2009)	Service sector in stronger expansion

The macroeconomic indicators demonstrate that the economy enters this value rotation from a position of relative strength [1]. Unlike 2008, when the economy was already showing signs of significant stress, the current environment features solid GDP growth, a resilient labor market with unemployment below 4%, and moderating inflation. Consumer sentiment, while not at cyclical highs, remains substantially more optimistic than during the 2008-09 downturn.

The Service PMI reading of 53.8 indicates the service sector—which constitutes the majority of U.S. economic activity—is in healthy expansion territory [1]. This is notably different from pre-bear-market conditions, when the service sector typically showed contraction or stagnation.

The convergence of multiple data sources confirms a coherent narrative: the market is undergoing a significant rotation from growth to value that appears structurally driven rather than sentiment-driven. The correlation between sector performance, index-level returns, and macroeconomic indicators suggests this rotation reflects genuine shifts in investor expectations about economic growth rather than temporary market dislocations.

The leadership transition from Technology to Basic Materials and Financial Services represents a meaningful rotation from consumer-facing growth to economically-sensitive value [0]. This pattern is consistent with expectations of accelerating industrial activity, rising interest rates (which benefit financial institutions), and improving corporate earnings in cyclically-sensitive sectors.

The magnitude of the valuation compression in growth stocks—evidenced by the 66% P/E premium relative to value—suggests that growth multiples had become structurally elevated rather than temporarily extended [0]. This has significant implications for future returns: value stocks now offer more reasonable entry valuations even after their recent outperformance, while growth stocks may require extended time to justify their elevated multiples through earnings growth.

The analysis suggests this rotation is occurring in the context of a “Goldilocks” economic scenario—conditions where economic growth is neither too strong (threatening inflation) nor too weak (threatening recession) [1]. This environment has historically been favorable for value-oriented investment strategies, as investors gain confidence in the sustainability of economic expansion and rotate toward sectors positioned to benefit from improving fundamentals.

A critical insight from the analysis is the distinction between structural and cyclical value rotations. The current environment appears to feature elements of both:

supporting value include:

• The normalization of growth valuations from unsustainable levels
• The rotation from momentum-driven growth strategies toward fundamentals-based value investing
• Increased investor focus on valuation discipline following extended growth dominance

supporting value include:

• Expectations of accelerating GDP growth (2.3% current vs. historical averages)
• Improving corporate earnings in economically-sensitive sectors
• The potential for tariff relief and fiscal stimulus as growth catalysts [1]

The interaction of these structural and cyclical factors suggests the current value rotation may have greater persistence than historical rotations that were primarily sentiment-driven.

1. Technical Reversal Risk
   : The 14% outperformance gap [1] is substantial and could attract contrarian buying if growth valuations become sufficiently attractive on a technical basis. Investors who exited growth positions may begin reallocating if short-term momentum indicators suggest oversold conditions.

2. Sector Concentration Risk
   : The Financial Services and Basic Materials sectors [0] driving value performance have their own sector-specific risks. Financial Services is sensitive to interest rate trajectories and credit quality, while Basic Materials is exposed to commodity price volatility.

3. Momentum Reversal Potential
   : Given the magnitude of the rotation, short-term mean reversion cannot be ruled out. Growth stocks have historically demonstrated strong rebound potential following periods of underperformance.

1. Inflation Resurgence
   : If inflation trends upward from current 3.5% levels [1], the Federal Reserve may need to maintain restrictive policy longer than anticipated, potentially disrupting the economic expansion that supports the value rotation thesis.

2. Credit Market Deterioration
   : Financial Services strength [0] could reverse quickly if credit conditions tighten. Commercial real estate exposure, consumer credit quality, and corporate leverage levels warrant monitoring.

3. Valuation Compression Risk
   : Both value and growth segments currently trade at elevated valuations relative to historical norms. The VTV P/E of 21.55x [0] is above long-term averages, suggesting limited valuation support from historical norms.

1. Structural Rotation Persistence
   : If the rotation reflects genuine economic acceleration rather than temporary market dynamics, value sectors could maintain leadership for an extended period. Historical patterns suggest value rotations can persist for multiple years when supported by fundamental economic improvements.

2. Valuation Normalization
   : The significant valuation premium in growth stocks relative to value creates opportunity for disciplined investors to rebalance toward more reasonably-valued segments while maintaining diversification.

3. Sector-Specific Opportunities
   : Within the value segment, Basic Materials and Financial Services show strong momentum [0] and may offer opportunities for tactical allocation, provided individual company fundamentals support the sector-level thesis.

The rotation’s sustainability will depend significantly on developments over the next 6-12 months:

• Federal Reserve policy trajectory
  : The path of interest rates will significantly impact relative sector performance, particularly for Financial Services and interest-rate-sensitive value segments.
• Earnings season performance
  : Relative earnings growth between value and growth sectors will either validate or challenge the rotation thesis.
• Macroeconomic data releases
  : GDP growth, inflation, and employment readings will confirm or challenge the “Goldilocks” economic scenario [1].

The comprehensive analysis reveals a significant value rotation underway in U.S. equity markets, with the Russell 1000 Value Index outperforming Growth by approximately 14 percentage points since November—the largest gap since the early 2000s [1]. Unlike previous instances of value outperformance that preceded bear markets, the current macroeconomic environment demonstrates relative strength across multiple dimensions: GDP growth of 2.3% exceeds crisis-period levels, unemployment at 3.9% remains well below historical averages, and consumer sentiment at 68 is substantially more optimistic than pre-bear-market conditions [1].

The market data corroborates this view: value-oriented indices (Dow Jones +2.67%, Russell 2000 +3.38%) have outperformed while growth-heavy indices (NASDAQ -2.33%, VUG -1.28%) have declined over the trailing 30-day period [0]. Sector performance shows economically-sensitive value sectors (Basic Materials +1.35%, Financial Services +0.93%) leading, while rate-sensitive growth sectors (Technology -2.00%) lag [0].

The 66% valuation premium in growth stocks relative to value (VTV P/E of 21.55x vs. VUG P/E of 35.81x) indicates this rotation is driven by valuation normalization rather than fundamental earnings deterioration [0]. This distinction is critical because it suggests the rotation reflects sustainable structural shifts in market leadership rather than temporary defensive positioning.

Key monitoring factors include Federal Reserve policy trajectory, relative earnings trends between value and growth sectors, and the sustainability of improving economic indicators. The current rotation appears structurally supported by the combination of valuation normalization and stronger macroeconomic fundamentals, distinguishing the present environment from historical precedents where value outperformance signaled imminent bear markets.