If 2022 was unquestionably a “Value” year, the beginning of 2023 has been significantly more complicated for this fund management style.

However, this overall observation should be nuanced as a function of the geographical zone under consideration.

The Value style in the United States effectively posted its worst ever relative performance (compared to the Growth style) between January and June 2023. The performance gap was substantially greater than in H1 2020 at the peak of the COVID crisis or in H2 1999, the peak of the TMT bubble.

If we now look at Europe, the Value indices also lagged Growth in H1, but ultimately in very modest proportions and to a much smaller extent than in the two previously cited periods.

Relative H1 performances of the MSCI Value vs Growth dividends reinvested indices since 2000:

In the United States

In Europe

Looking beyond this simple observation, it is interesting to examine the reasons for this significant difference between Europe and the United States.

The determining factor lies in the difference in the “sector” composition of these indices.

In the United States, the weighting of technology in the broadest sense of the term is effectively overwhelming and these sectors are particularly well represented in the Growth indices. Information technologies (Apple, Microsoft, Nvidia), communication services (Alphabet, Meta) and discretionary consumer spending (Amazon, Tesla) represent 75% of the MSCI USA Growth index but only 21.5% of its Value counterpart. That said, these three sectors have posted rallies ranging between 32% and 41% this year, boosted notably by investor enthusiasm for the artificial intelligence theme and thereby explaining at least two-thirds of the performance gaps between Growth and Value in the United States. In Europe, technology represents only around 13% of the Growth indices (versus 3% of the Value indices) and while other sectors such as luxury goods and industry (which have performed rather well this year) are also well represented, their weighting is offset by the substantial weighting of the healthcare and durable consumer goods sectors, which have shown more modest performances in 2023.

The denigrators of “old Europe” will say that this lack of technological heavyweights is additional proof of the lack of attractiveness of Europe for investors. However, this could also be an opportunity for European investors, be they Value, Growth or agnostic in terms of fund management styles, to have more balanced portfolios in sector terms.

Value Style: the "great decoupling" between Europe and the United States

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