That suggested that investors had finally gotten behind the notion that the economy really is booming and were ready to reward value stocks, the market’s cheapest and the biggest beneficiary of that growth.
Just 266,000 jobs were added in April, well below economist forecasts for about a million, making it the biggest miss on record.
Futures on the Dow, the most economically sensitive major benchmark, slipped into the red, and Nasdaq futures were pointing to a gain of more than 1%, which made sense given it’s the least dependent on the economy for gains.
But then, soon after the market opened, the 10-year yield was close to unchanged on the day, while the Dow had gained 229.23 points, a sign that the market, at least, didn’t believe that the economy was stagnating the way the payrolls number suggested.
And by the end of the week, it was impossible to disguise how badly growth stocks—those whose growth is expected to outpace the market’s—had performed.
How’s that, you ask? Despite the payrolls shocker, the economy still looks set to expand strongly over the next couple of years, and that’s all value stocks need to beat growth.
are expected to grow earnings per share at a 24% clip over the next 12 months, according to Christopher Harvey, U.S.
The Russell 1000 Growth index was trading at 30 times forward earnings this past Thursday, a 56% premium to the Russell 1000 Value index’s 19.2 times, near a 20-year high, Harvey notes.
For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.