Market Overview

The (Not So) Black-And-White Choice Between Growth And Value

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The Not So Black-And-White Choice Between Growth And Value

Much has been written about the perpetual shift in sentiment between growth and value. Market timers are always trying to figure out when investors are becoming more bullish on growth stocks and bearish on value, or vice versa, and the resulting actions can go a long way in determining which sectors and industries outperform.

A Trader’s Point Of View

Nowhere is this more apparent than in the tech sector. Tech is traditionally classified as a growth sector, but even within that, there are high-growth areas that correlate to a more “risk-on” environment. Take a look at the course plotted by Direxion’s spate of tech-focused leveraged ETFs compared to that of the ETF issuer’s broad market Daily S&P 500® Bull 3X Shares (NYSE: SPXL), below in yellow.

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Chart: Yahoo Finance; Data as of March April 1, 2019. Past performance is not indicative of future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.  Current performance may be lower or higher than the performance data quoted. For standardized performance, click here.

While SPXL was up nearly 50 percent in the first quarter of 2019, all three Direxion tech-focused ETFs, Direxion Daily Technology Bull 3X Shares (NYSE: TECL), Daily Semiconductor Bull 3X Shares (NYSE: SOXL) and Daily Robotics, Artificial Intelligence & Automation Index Bull 3X Shares (NYSE: UBOT), outperformed by more than 20 percentage points. For context, that’s the best first-quarter performance for those ETFs (excluding UBOT, which is less than a year old) in more than five years.

This outperformance tells us that investors had a very strong appetite for high-growth tech names in the first quarter.

As for value, Direxion Daily Utilities Bull 3X Shares (NYSE: UTSL), Direxion Daily Financial Bull 3X Shares (NYSE: FAS) and Direxion Daily Consumer Staples Bull 3X Shares (NYSE:NEED) all are trading below the SPXL. So, the trend has clearly favored growth.

Growth vs. Value For Intermediate-Term Investors

Put another way, look at the performance of the Direxion Russell 1000® Growth Over Value ETF (NYSE: RWGV) or Value Over Growth (NYSE: RWVG) ETFs, which combine both long and short components to deliver returns on correlated asset types.

The value over growth pair, which is up 6 percent year-to-date, is ripe for investors who might anticipate a narrowing between the high-flying sectors like tech and biotech and the value sectors like consumer staples and utilities.

In the case of growth over value, which is up 14 percent YTD, investors likely hold the thesis the market will continue to favor aggressive growth stocks, even if the weak Lyft IPO may have dampened unicorn spirits a bit.

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Chart: Yahoo Finance; Data as of March April 1, 2019. Past performance is not indicative of future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.  Current performance may be lower or higher than the performance data quoted. For standardized performance, click here.

The market has clearly shown a desire to go overweight growth and underweight value in 2019. Of course, it’s not a question of if this trend will change, but when. Most investors will not be able to time a true shift in sentiment between growth and value—it’s immensely difficult and requires some luck. But trading isn’t always about being first—it’s about adapting to changes when they are clear to see. The best thing to say about the growth-value relationship is it won’t be going away anytime soon.


An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at direxioninvestments.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.

Shares of the Direxion Shares are bought and sold at market price (not NAV) and are not individually redeemed from a Fund. Market Price returns are based upon the midpoint of the bid/ask spread at 4:00 pm EST (when NAV is normally calculated) and do not represent the returns you would receive if you traded shares at other times. Brokerage commissions will reduce returns. Fund returns assume that dividends and capital gains distributions have been reinvested in the Fund at NAV. Some performance results reflect expense reimbursements or recoupments and fee waivers in effect during certain periods shown. Absent these reimbursements or recoupments and fee waivers, results would have been less favorable.

Direxion Shares Risks - An investment in the ETFs involves risk, including the possible loss of principal. The ETFs are non-diversified and include risks associated with concentration that results from an ETF’s investments in a particular industry or sector which can increase volatility. The use of derivatives such as futures contracts and swaps are subject to market risks that may cause their price to fluctuate over time. The ETFs do not attempt to, and should not be expected to, provide returns which are a multiple of the return of their respective index for periods other than a single day. For other risks including leverage, correlation, daily compounding, market volatility and risks specific to an industry or sector, please read the prospectus.

Direxion Relative Weight ETF Risks: Investing involves risk including possible loss of principal. The ETFs’ investments in derivatives may pose risks in addition to, and greater than, those associated with directly investing in or shorting securities or other investments. There is no guarantee that the returns on an ETF’s long or short positions will produce high, or even positive returns and the ETF could lose money if either or both of the ETF’s long and short positions produce negative returns.  Please see the summary and full prospectuses for a more complete description of these and other risks of the ETFs.

Distributor: Foreside Fund Services, LLC.

Posted-In: Direxion ETFSector ETFs Specialty ETFs Trading Ideas ETFs

 

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