Did traditional style indexes create a false narrative for factor analysis in 2022?

Introduction

One of the key market dynamics in 2022 was the significant rotation out of Growth stocks towards Value stocks depicted though the movement of style indexes. As can be seen in exhibit 1 the FT Wilshire large cap value index not only outperformed the FT Wilshire Large Cap index by 13.2% in 2022 it outperformed the large cap growth index by a significant 25.1%. The Growth style underperformed the FT Wilshire Large Cap index by 11.9%. The rotation out of Growth towards Value in 2022 in effect neutralized the marked rotation to Growth that occurred in the immediate aftermath of the Covid pandemic in 2020.

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