In years of growth or at least prospects for economic growth in the short term, it is perfectly natural that so-called growth companies, such as large technology companies where dividend distribution is a rarity, behave better than so-called value companies, where the dividend is practically an obligation. This is how it has been over the last few decades and this has been the case in recent years, however, the year now ending has generated an abnormality in the market or better exacerbated the cleavage that had occurred previously, with growth companies registering a very sharp appreciation while the value companies close the year in the red, at a time when the main economies are facing severe economic slowdown due to the COVID-19 pandemic.
It is clear that in years when Wall Street has substantial gains, the greater relative strength of growth companies is a reality, the point is that 2020 only ends with a substantial rise in the main indices due to the distortion of the market fundamentals caused by the giant bubble of liquidity injected by central banks, notably the EDF. Capital that has been channelled with a strong preponderance to the technological sector, specifically in a clear case in which the choice has fallen on the big winners of the last years, which ends up generating a snowball effect allowing SPYG, the S&P500 Growth ETF to gain of 31% in the last 12 months, which contrasts with the loss of -2.72% of SPYV, the S&P500 Value ETF.
At this stage it is essential to be pragmatic, as it is certain that the situation of overvaluation of the market in general, but especially of technological ones in particular, the reality is that the situation will hardly be reversed in the next year taking into account that 2021 should continue to be a year of pouring more money into the system by the FED, not to mention the fiscal stimulus programs that may be approved and that in part will give impetus to private consumption not to weaken and consequently so that it is no longer justified a correction in the style of March 2020