may present a headwind for value outperformance.
Taking a technical analysis perspective, we observe that the value relative performance line versus growth broke out of a four-year downtrend in late 2016. We believe this positive technical development favors value, although the Russell 1000 Value Index does appear to be working off short-term overbought conditions (a technical way of saying in the short-term, relative performance may be a bit ahead of itself). Nonetheless, strictly from a technical perspective, the extended value underperformance suggests a potential long-term opportunity in value [Figure 4].
We see several reasons to like value stocks, including accelerating economic and profit growth, the better outlook for financials, and the breakout versus growth from a technical analysis perspective. But the growth-heavy technology sector looks good to us, the value-oriented utilities do not, and value looks expensive relative to growth. Bottom line, the growth side has enough going for it that we suggest investors maintain fairly balanced style allocations.
Article by Burt White, Chief Investment Strategist for LPL Financial