The recent resurgence of growth stocks has reignited debate among financial advisors about portfolio allocation. The iShares S&P 500 Growth ETF (IVW) surged 11.5% over the past month, nearly doubling the 6.5% gain of the iShares S&P 500 Value ETF (IVE). Yet many wealth managers caution against a wholesale shift back to growth, arguing that value still offers compelling attributes.
Over the trailing 12 months, the price-to-earnings multiple for IVE stood at 24, compared with 33 for IVW. That valuation gap, combined with higher interest rates and persistent inflation, makes value-oriented sectors such as financials and industrials attractive, according to Sean Beznicki, director of investments at VLP Financial Advisors. He advises focusing on free cash flow yield rather than traditional book-to-price metrics, which can miss value in an intangible-driven economy.
Caroline Edwards, senior client portfolio manager at Putnam Investments, points to shifting macro conditions that could sustain the value narrative. She cites potential extended conflict between Iran and the U.S., which could boost energy prices, reignite inflation, and lead to rate increases. These factors, she says, may keep value relevant given its exposure to sectors that benefit from such dynamics. Edwards avoids "value for value's sake" and instead seeks companies with "multiple ways to win," such as new management, cost-cutting programs, or changing industry dynamics.
Edwards emphasizes that value investing requires patience, typically aiming for a five-year time horizon. "Value takes a long time to matriculate; you can’t expect to see significant progress over shorter periods," she said.
Krishna Chintalapalli, portfolio manager at Parnassus Investments, argues that the recent market pullback underscores the need for a balanced approach. He advises looking beyond low multiples to assess business quality, as cheap stocks can be "value traps" with structural challenges. Active management, he says, can help advisors avoid such pitfalls while capturing long-term trends without paying growth-stock multiples. This is especially relevant as advisors consider Generative AI in wealth management and other transformative themes.
Daniel Lash, also a partner at VLP Financial Advisors, notes that asset classes cycle through performance periods. While growth has dominated for much of the past decade, value historically provides higher dividends, making it a key income source for clients requiring portfolio cash flow. He advises maintaining diversified exposure rather than chasing recent winners.
Advisors may also want to consider how custodian platform fees affect net returns, particularly for value-oriented strategies that rely on dividend income. As the growth-value debate continues, the consensus among these experts is clear: don't abandon value entirely.
