Divergence Occuring, Updated
A month ago I wrote a post called “Divergence Occurring” (here is the original post https://willhassellws.wordpress.com/2015/07/29/divergence-occuring/). In the post I point out that there is a divergence occurring when between growth and value.
This is the Chart of RLV (white) and RLG (orange) from the original post, it is on a five year time line and you can see the small divergence.
Here is thew same chart just zoomed in to see the difference clearer.
Since my first post there has been a correction in stocks and not like the one we saw last October, but a actual 10% correction. I’m now at Lehigh University where I have access to Bloomberg terminals. Being the finance nerd I am I began to use them, creating my very own login and everything. In the midst of using the terminal one day I remembered this post and decided to check in on the divergence. I thought I would see the divergence reverse due the correction and see value out perform as it has done through out history. I was mistaken.
Here is the same chart of the RLV and RLG in a five year period. You will notice that there are some differences in the two charts. The first is the big drop in both index due to the correction. The second is that there is a more defined patch of read on the graph, indicating growth is over value, then it was on the first 5 year graph. This shows the duration of the move growth has had. This is shown again in the graph below the main one showing the size of the spread. You will notice that it is now read showing once again that the spread between value and growth has reversed.
Lets take a closer look at this recent move.
Here is a 1 year chart of the same indexes as above, just at a shorter duration and zoomed in. Here we can really see the divergence between growth and that the divergence continued through the correction. Not only that, but we actually see the spread at its widest at the bottom of the correction.
Lets now take a look at the long term chart
On the long term chart we can that the recent move just barely shows up. You may also notice that the last big divergence between these two indexes was in the Tech Bubble. This is the part of the post where I say that you can take this information anyway you want to, I am simply putting it out in front of you. I think we could be seeing the start of a period of growth out performing value, but I don’t think we are gonna see a crash.
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What Im Reading This Morning
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also….
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WillHassellws 