This chart shows just how badly value stocks are getting left in the dust this year

Value stocks are experiencing their weakest relative performance against growth stocks and the broader market since the dot-com bubble in 2025, driven by the AI boom and investor focus on growth narratives. The Russell 3000 Value Index is up 10.4% year-to-date, significantly trailing the Russell 3000 Growth Index's 17.4% gain. However, Evercore ISI's Julian Emanuel highlights historical data suggesting value stocks tend to lead in subsequent periods when market multiples are as elevated as they are currently, indicating a potential future rotation.

Analysis

Value stocks are experiencing their most significant underperformance relative to growth counterparts since the 2000 dot-com bubble, a trend primarily driven by the investor frenzy for AI-related growth narratives in 2025. This divergence is quantified by the Russell 3000 Value Index's 10.4% year-to-date gain, which starkly trails the 17.4% advance of the Russell 3000 Growth Index. According to analysis from Evercore ISI, on a six-month rolling basis, the highest-ranked value stocks have lagged the lowest-ranked by the widest margin in over two decades. Despite this pronounced weakness, the report highlights a critical historical precedent: in past periods when market multiples were as elevated as they are currently, value as a factor has typically led performance over the subsequent 12 months. While the current situation draws parallels to the dot-com era, Evercore's Julian Emanuel notes that overall market valuations have not yet reached the extreme peaks seen in 2000, suggesting a potential, though not identical, setup for a factor rotation.

Key Decisions for Investors

• Investors with heavy exposure to high-momentum growth stocks should consider the risk of a factor rotation, as the current level of value underperformance and elevated market multiples have historically preceded periods of value leadership.
• For long-term and contrarian investors, the current environment may present a strategic opportunity to accumulate positions in value-oriented equities, capitalizing on the historically wide performance gap and the potential for mean reversion over the next 12 months.
• Given the conflicting signals of strong current growth momentum versus historical data favoring a value rebound, maintaining a balanced factor exposure could be a prudent strategy to mitigate portfolio volatility from a potential, sharp shift in market leadership.