Value Stocks Reclaim Dominance in International Small Caps
Historically, value stocks have outperformed growth stocks in the international small cap space (see Exhibit 1).
However, the period from 2015 to 2020 proved to be an outlier, with an unusual period of strong outperformance by growth stocks. Subsequent to 2020, value reasserted its dominant position within the international small cap space.
Exhibit 1: Value has Historically Outperformed Growth in International Small Cap Space
Source: eVestment. Data as of 3/31/24. Performance is shown gross of dividends. Chart represents the difference between annualized performance of the MSCI EAFE Small Cap Value and MSCI EAFE Small Cap Growth indices for the specified time periods. MSCI EAFE Small Cap Index is an equity index which captures small cap representation across Developed Markets countries around the world, excluding the U.S. and Canada. The index covers approximately 14% of the free float-adjusted market capitalization in each country.
Value Stocks Remain Attractive as Valuations Are Still Below Historical Medians
The strong returns for growth stocks from 2015 to 2020 came on the back of large moves in valuations between value and growth, where growth stocks became historically expensive and value stocks became historically cheap. This process has reversed over the past few years, powering even larger than normal value outperformance. Valuations have still not yet reached typical historical levels, leaving value stocks well-positioned relative to growth.
Exhibit 2: Relative Price-to-Book (P/B) of EAFE SC Value vs. EAFE SC Growth
Source: eVestment. Data as of 3/31/24. Performance is shown gross of dividends. Chart represents the difference between annualized performance of the MSCI EAFE Small Cap Value and MSCI EAFE Small Cap Growth indices for the specified time periods.
To learn more about SBH or speak to a sales representative, please contact us at (800) 836-4265 or contactus@sbhic.com.
Investment risks: The value of equity securities is sensitive to stock market volatility. Investments in foreign instruments or currencies can involves greater risk and volatility than U.S. investments because of adverse market, economic, political, regulatory, geopolitical, currency exchange rates or other conditions in emerging countries, these risks may be more.
The opinions expressed in this article are solely the opinions of Segall Bryant & Hamill or an unaffiliated third party. You should not treat any opinion in this article. The opinions and statements are subject to change without notice and Segall Bryant & Hamill is not obligated to update or correct any information in this article. For illustrative purposes only.
