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Small-Cap Value Comes Back--But Not All the Way

It's too soon to tell whether small-value's November resurgence will endure.

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Small-cap value has surged back in the fourth quarter, but it still has a long way to go to recoup years of relative underperformance. The Russell 2000 and Russell 2000 Value indexes rose 18.4% and 19.3%, respectively in November, their best absolute gains since their December 1978 inceptions. The Russell 2000 Growth Index, however, posted a strong 17.6% rise itself and remained far ahead of both its sibling benchmarks for the year and over longer trailing periods through November. The Russell 2000 Value’s paltry 0.8% annualized trailing three-year gain through month's end, for instance, trailed the Russell 2000 Growth Index’s advance by 12 percentage points.

Still, many investors wonder whether November’s sharp value rally signals a sea change. The answer is maybe. It’s too soon to tell.

Linda Abu Mushrefova does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.