Indices: who comes out on top in the Value vs Growth duel?

Some prefer to rely on the fundamental qualities of companies, like the unrivalled boss of Berkshire Hathaway, Warren Buffett. Others, like Cathie Wood, the renowned head of Ark Invest, the innovation-focused investment company, prefer to bet on the appreciation potential of fast-growing companies. If these two management styles have proven their worth over the course of stock market history, let's take a look at how each has performed over the past year.

A picture is worth a thousand words

In the United States, there's no contest: in 2023, the Growth management style clearly outperformed its Value counterpart. Value stocks, which include more mature companies in the oil, financial and healthcare sectors - such as United Health, Johnson & Johnson, Procter & Gamble, Merck, JPMorgan, Exxon and Chevron - have suffered more from monetary tightening, inflation, restricted access to financing and fears of global recession.

Growth companies - led by the Magnificent 7, Apple, Microsoft, Amazon, Nvidia, Meta, Alphabet and Tesla - were boosted by the hype surrounding technology, Artificial Intelligence and automation. Persistent inflation could, however, turn the tide this year, and call into question the companies' stratospheric valuations or their overweight positions on the Nasdaq.

Converging struggles

In Europe, the picture is far less eloquent. Home to few pioneering AI companies, and less affected by inflation than on the other side of the Atlantic, the continent has been able to defend its value stocks on defensives - Shell, Total Energies, Novartis, Sanofi, Allianz, UBS, Unilever - grace to the performance of oil companies, among others, boosted by rising oil and gas prices.

Growth stocks, which led the way in Q2 and Q3, led by the overwhelming success of Novo Nordisk, semiconductors, luxury goods, consumer goods - Nestlé ASML, LVMH, L'Oréal - suffered, among other things, from the weakness of the Chinese economy, and were overtaken in Q4 by their value counterparts.

ETFs: the revenge of innovation

ARK Invest, which had largely failed to win its technology bets in 2022, took its revenge in 2023, led, if it needs repeating, by the strength of AI.

Growth investors, don't declare victory just yet! On a broader time horizon, Cathie Wood has yet to erase its previous losses. Here again, inflation and monetary policy should set the tone for 2024.