Value stocks have outperformed growth stocks by the widest margin in years. The Russell 1000 Value Index is up 2.4 percent year to date, while the Russell 1000 Growth Index has fallen 9.1 percent -- an 11.5 percentage point gap that marks the largest divergence since the post-financial crisis rotation of 2022 [1].

The shift is structural, not cyclical. Energy, defense, and commodity stocks have led the S&P 500's best performers in the first quarter of 2026, even as the broader index fell 4.6 percent [2]. Large value stocks led in six of the first seven weeks of the year, according to StoneX, as fund managers rotated out of mega-cap technology concentration and into sectors that benefit from wartime spending and supply chain disruption [3].

Bank of America's latest fund manager survey found that 43 percent of institutional investors expect value to be the winning theme over the next 12 months [4]. The war in Iran has accelerated a rotation that was already underway: rising oil prices lift energy producers, defense contracts flow to aerospace and munitions companies, and inflation hedges like agriculture and metals outperform growth-oriented tech names [5]. The S&P 500's worst quarter in four years produced a clear winner. It was not the one that dominated the last decade.

-- THEO KAPLAN, San Francisco