U.S. Value Stocks Are on Their Longest Losing Streak on Record. Why They Could See a Comeback in 2025.

Value stocks, which surged following President-elect Donald Trump’s November victory, have encountered significant challenges as December unfolds. A widely followed index of value stocks within the S&P 500 is on pace to decline for a 10th consecutive trading day, losing nearly 4% during this streak. According to Dow Jones Market Data, this marks the longest losing streak on record for the index, with data tracing back to 2000. If losses continue, the record will only extend further.

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Despite recent setbacks, the SPDR Portfolio S&P 500 Value ETF (SPYV), a fund tracking the S&P 500 Value Index, has maintained a commendable 14% gain since the start of 2024. However, the current pullback raises questions about the sustainability of value stocks’ strong performance earlier in the year.

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Jay Hatfield, portfolio manager at Infrastructure Capital, highlights two main factors behind the retreat in value stocks. First, the post-election optimism that buoyed markets in November has begun to dissipate. Investors are re-evaluating the potential impact of Trump’s policies as initial euphoria wanes.

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Simultaneously, rising Treasury yields have put downward pressure on stocks outside the technology sector. The 10-year Treasury yield, in particular, has crept higher, creating a divergence between growth and value stocks. This divergence has fueled a notable streak of growth-stock outperformance in December, with rising interest rates playing a pivotal role.

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“Rising rates are what’s driving this,” Hatfield explained during an interview with MarketWatch. As interest rates climb, they tend to weigh more heavily on value stocks, which are often viewed as more sensitive to economic shifts than their growth-oriented counterparts.

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What Defines a Value Stock?

Value stocks are typically established companies with steady, albeit modest, earnings growth. They are often characterized by low price-to-book and price-to-sales ratios, two key metrics used to assess whether a stock is undervalued. In the S&P 500 Value Index, prominent names include Berkshire Hathaway, JPMorgan Chase, Exxon Mobil, Walmart, and UnitedHealth Group (UNH). Among these, UNH is not only a top value stock but also the largest component of the Dow Jones Industrial Average.

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However, UnitedHealth Group has faced significant headwinds recently, contributing to broader market struggles in December. Hatfield attributes much of UNH’s decline to bipartisan legislation that could force health insurers to separate from their pharmacy benefit managers, a lucrative revenue stream. These regulatory concerns have amplified pressure on the stock, which has also been in the spotlight for other reasons.

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Optimism for 2025

While the recent downturn has caught many on Wall Street off guard, analysts remain optimistic about the prospects for value stocks in 2025. Jose Torres, senior economist at Interactive Brokers, shared his perspective in commentary emailed to MarketWatch. Torres believes the incoming Trump administration’s policies could favor small-cap and value-oriented stocks, particularly through lighter regulations and reduced taxation.

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“An important question is which market segments are poised to benefit the most from lighter regulations and reduced taxation?” Torres said. “Small-cap and value-oriented areas tend to be domestically focused and are the most levered to those stateside benefits since their global reach is limited on a relative basis.”

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Torres noted that such companies pay the majority of their taxes in the U.S. and are primarily affected by domestic regulations. As a result, he anticipates strong performance from benchmarks like the Russell 2000 and the Dow Jones Industrial Average in the coming months.

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Mixed Market Performance

On Friday, U.S. stocks exhibited mixed performance. The S&P 500 remained relatively flat, while the Dow Jones Industrial Average fell by 64 points, or 0.2%, reaching 43,847. This puts the Dow on track for its worst weekly performance since late October. Meanwhile, the Nasdaq Composite posted a modest gain of 0.1%, closing at 19,925.

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The broader market’s fluctuations reflect the uncertainty surrounding value stocks and their role in the evolving economic landscape. While the near-term outlook remains challenging, many investors see potential for a rebound in 2025, driven by favorable policy changes and improved sentiment toward domestically focused sectors.

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Conclusion

Value stocks have faced a challenging December, with a record-breaking losing streak highlighting their struggles. Rising Treasury yields and fading post-election optimism have weighed heavily on this segment of the market. However, market experts remain hopeful about the prospects for value-oriented names as the new year approaches. With policies from the Trump administration expected to benefit small-cap and value stocks, 2025 could offer a more favorable environment for these traditionally stable investments. In the meantime, the market’s focus will likely remain on navigating the challenges posed by rising rates and regulatory uncertainties.

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