Shannon Stapleton/Reuters
- Stocks put up an impressive performance in the first half of 2021, with the S&P 500 returning 15.2%.
- Value beat out growth, as the Russell 1000 Value index outstripped the equivalent growth index by 3.3 percentage points.
- In May, BofA analysts argued US stocks are finishing the first year of a 33-month "value cycle".
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Value stocks are positioned to outperform growth names as a multi-year "value cycle" is underway, Bank of America analysts wrote in a note reviewing the first half of 2021 in US equities.
Stocks put up an impressive performance in the first six months of the year, with the S&P 500 returning 15.2% including dividends. Equities were the only "major" asset class to yield positive returns in the first half, after a sub-zero performance by Treasury bonds, corporate debt, and gold. The BofA note did not examine broader commodity indices, which tended to perform well in the first half.
Within equities, value beat out growth, as the Russell 1000 Value index outstripped the equivalent growth index by 3.3 percentage points.
Doubling down on prior forecasts, the BofA analysts took a bullish stance on value for the coming months. In May, the analysts argued that US equities are finishing the first year of a 33-month "value cycle" in which value has historically outperformed by around 60%. Since the current value cycle has begun, value has outperformed growth by 20%, suggesting it still has room to run, they wrote.
Small caps also tended to outperform mid- and large-cap stocks, led by small-cap energy companies. The Russell 2000 small-cap index returned a blistering 17.5% between January and June.
"We continue to believe the economic backdrop and relative valuations support a preference for small caps over large caps in the 2H," the BofA analysts wrote.