Through 2026 so far, stocks considered "value" have been beating stocks considered "growth" in the market. This shift started in late 2025 and has been picking up speed since (State Street Global Advisors).

Here is the basic idea: growth stocks are companies whose profits are expected to grow fast (think tech companies). Value stocks are companies that look cheap relative to what they earn (think banks or energy firms). Investors rotate between these two styles depending on the economy and interest rates.

The gap between the two is not small or new. From early November 2025 to early February 2026, the Russell 1000 Value Index — a basket of value stocks among the 1,000 largest U.S. companies — rose 8.6% and beat its growth counterpart by 14 percentage points over that window (Bloomberg). A gap that wide in just three months forces big fund managers to change course.

Smaller companies have done even better. For the one-year period ended June 30, 2026, the Russell 2000 Index — which tracks smaller companies — returned 40.8%, nearly double the 22.0% returned by the large-company Russell 1000. An index of even tinier companies, the Russell Microcap, gained 58.5% (Royce Investment Partners). In the first quarter of 2026 alone, small-cap value stocks returned 5.0% (Columbia Threadneedle). Small companies and cheaper stocks have been winning together.

There is another layer to this story, and it involves how stock indexes are put together. Each June, a company called FTSE Russell reshuffles its indexes, reclassifying stocks as growth or value based on their financial profile. In June 2026, 62 companies were expected to be added to the Russell 1000 Index (LSEG). More notably, Apple and Microsoft were set to appear in both the value and growth indexes, a dual-classification outcome that reflects how their style scores had evolved (Reuters). At that same reconstitution, Amazon, Apple, and Microsoft were reclassified toward value (ETF Database).

This did not happen overnight. At the June 2025 reshuffle, minority portions of Amazon.com, Meta Platforms, and Alphabet were added to the value index (Morgan Stanley Investment Management). The progression from partial value inclusion to fuller value classification for these names tracks a steady shift in how the largest companies are scored. T. Rowe Price noted that during the June 2026 reconstitution, Apple, Amazon.com, and Microsoft were projected to see their weightings in the growth index decrease (T. Rowe Price).

Think of it like a store reorganizing its shelves. If the store decides a product belongs in the "clearance" section instead of "premium," it moves there automatically. When a stock like Apple gets reclassified from growth toward value, index funds that track growth automatically sell some of it, and index funds that track value automatically buy it. The reshuffle forces the trade, regardless of what the company is actually doing. And when the names involved are among the biggest in the market, that is a lot of buying and selling.

The broader context is that two separate forces have been pushing in the same direction. The first is performance: smaller companies and cheaper stocks have been delivering bigger returns than growth stocks and large companies over the past year. The Russell Microcap's 58.5% one-year return reflects a willingness to take on more risk that goes well beyond the handful of giant tech companies that led the market in prior years. The second is structural: the classification system itself is moving the biggest companies toward value, which means index funds are now amplifying the same shift that active managers have been dealing with.

For anyone holding a growth index fund, the practical result is that they ended up with less Apple, Amazon, and Microsoft after the June 2026 reshuffle. Someone holding a value index fund ended up with more of those same stocks. The companies did not change — only their labels did.

Whether this shift lasts is a separate question. The reclassification system looks backward at data like price relative to earnings, not forward. It does not predict. The performance figures through June 30, 2026 capture a specific period when smaller and cheaper stocks did well, and the year-to-date value lead confirmed by State Street on July 27 extends that trend into the second half. But those one-year numbers will eventually fall off, and the big companies reclassified toward value could move back if their stock prices change direction.

What is verifiable is that this is not a one-quarter blip. It spans at least nine months of performance data, two reconstitution cycles, and a progressive reclassification of the market's largest companies. For now, the labeling system and the market are moving in the same direction. That alignment is what makes the current environment unusual, and worth watching.