Value Stocks Are Crushing Growth Superstars In 2025: Is More To Come?

Value stocks have flipped the market script on their growth counterparts so far this year, with the Russell 1000 Value Index outperforming the Russell 1000 Growth Index by 11% in just three short months.

The iShares Russell 1000 Value ETF IWD, which tracks the Russell 1000 Value, and the iShares Russell 1000 Growth ETF IWF for the Russell 1000 Growth, similarly have a little under 10% gap this year so far, in favor of the value fund.

The last time this happened was during the bear market of 2022, when rising rates, persistent inflation, and unjustifiably high valuations sent investors scurrying for safer options to park their funds. In 2024, however, growth stocks regained their momentum, aided by rate cuts and strong momentum across tech and AI stocks.

Now, as chaos reigns on Wall Street, with tariffs, geopolitical tensions, and even fresh recessionary fears cropping up, investors are once again finding safety in value. But, is this here to stay, or just a fleeting trend that is waiting to turn around?

Why Value Stocks Are More Resilient?

Value stocks, by their very definition, are those that are currently undervalued, relative to their assets, earnings, and future prospects. So, during periods of volatility and uncertainty, they have limited downside risks, especially when compared to growth stocks.

Besides this, value stocks, funds, and ETFs are generally more concentrated in sectors such as healthcare and utilities, which aren’t impacted by the tariffs. Similarly, base materials, steel, aluminum, and other industrials that form the other big chunk of value stocks in the U.S. stand to benefit from President Trump’s trade wars.

See Also: Goldman Sachs Warns US Stocks ‘Are At Risk Of Further Declines,’ But Policy Pivot From Trump Or Fed Could Stoke Recovery

More Reasons For Value To Rebound In 2025

According to Tony DeSpirito, the Chief Investment Officer at BlackRock BLK, another reason why values are set to outperform this year is simply the remarkable run-up that growth stocks have experienced in recent years. Growth stocks now represent nearly 40% of the S&P 500, significantly higher than the historical average of 24%.

This means that a correction is warranted, as investors will look for diversification and more exposure to value picks, even without the existing market turmoil and uncertainties.

DeSpirito further cites the valuation gap between the Russell growth and value indexes, which is now at its widest since December 2000, which kickstarted a three-year bear market through 2002, during which value stocks outperformed growth.

Image via Shutterstock

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