Growth-to-Value Rotation — When the Market's Leadership Flips
S&P 500 returns after growth stocks lag value by 5% in three months
Growth stocks are priced for rapid future expansion; value stocks trade cheaply relative to their current earnings and assets. Sharp rotations from growth into value are rare and often regime-defining — the dot-com unwind of 2000-02, the 2016 reflation trade, and the 2022 rate shock all featured growth lagging value by 5% or more over three months. This chart shows how the broad S&P 500 performed after each rotation signal.
| Date | 1M return | 1Y return | 5Y return |
|---|---|---|---|
| 2000-09-12 | -7.9% | -30.3% | -16.9% |
| 2002-04-15 | -0.5% | -19.7% | +33.5% |
| 2003-06-02 | +1.6% | +15.9% | +42.5% |
| 2004-08-09 | +4.8% | +14.8% | -5.5% |
| 2006-04-20 | -3.4% | +12.9% | +1.4% |
| 2008-09-08 | -21.4% | -19.1% | +32.8% |
| 2009-09-16 | +2.6% | +5.2% | +88.2% |
| 2011-02-23 | +0.2% | +4.3% | +49.0% |
| 2016-04-22 | -2.1% | +13.5% | +100.2% |
| 2019-11-05 | +1.4% | +12.0% | +94.3% |
| 2020-11-23 | +3.1% | +31.1% | +90.4% |
| 2022-01-21 | -2.1% |
What history says
Editorial commentary written by ALAN analysts. Figures cited below are analyst-authored context — they are not derived from the chart above and may reflect different windows or sources.
Growth loses to value most violently when interest rates rise or speculative valuations unwind, because growth stocks depend on distant future earnings that are worth less when discount rates climb.
The 2000-02 rotation ran for years, not months. When a regime genuinely turns, the early signal has historically been the beginning of the repricing rather than the end of it.
After a long growth-led market, index funds and individual holdings alike drift toward growth concentration. A rotation signal exposes how large that unmanaged tilt has become.
When a growth-to-value rotation triggers, measure the portfolio's actual style tilt against its intended one — years of growth leadership typically leave allocations far more growth-heavy than their owners realize. Consider rebalancing across style exposures back to written targets rather than betting the rotation reverses.