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Diversification · Growth Stocks · Market Rotation · Value Stocks
The iShares S&P 500 Value ETF (IVE) is outperforming the iShares S&P 500 Growth ETF (IVW) year-to-date in 2025, with IVE up over 2 percent while IVW is down over 5 percent, prompting wealth managers to debate if this signals a lasting market rotation.
This recent shift follows years of significant growth stock outperformance, where IVW returned 120 percent over five years compared to IVE's 87 percent. Adam Reinert of Marshall Financial notes that growth-focused stocks, like Nvidia, are weighing on equities, with Nvidia's forward earnings multiple recently dropping from 50 times to 24 times.
James Humphries of Mindset Wealth Management attributes the current trend to elevated Fed rates, which are causing investors to reevaluate high-growth stocks that thrived on cheap capital. Humphries highlights IVW's vulnerability due to its 46 percent tech and 16 percent consumer discretionary exposure, contrasting it with IVE's stability from 22 percent financials and 13 percent industrials.
While Reinert and Ron Piccinini of Amplify Technology consider it too early to declare a lasting "passing of the baton," Humphries suggests it resembles a "market adjustment" seen in early 2022. Matt Liebman, CEO of Amplius Wealth Advisors, advocates for "The Bull Market in Diversification," recommending increased exposure to international, small-cap, and value stocks to hedge against the long-term dominance of large-cap U.S. growth.
The future direction depends on Fed policy, GDP growth, and sector earnings.
