Through the middle of 2026, a group of stocks called "value" stocks was up 23% for the year, while "growth" stocks were up 15%, according to the Wall Street Journal. That is the widest gap in value's favor in the first half of a year since 2022. MarketWatch / Dow Jones Market Data

Value stocks are shares of companies that look cheap compared with what they earn — often older, established businesses like banks and manufacturers. Growth stocks are shares of companies where investors pay a premium because they expect profits to grow fast — often technology companies. The two take turns leading the market.

The shift started early. StoneX, a financial services firm, reported that value stocks beat growth stocks by a double-digit margin in the first weeks of 2026 — a real change in where investors were putting their money. StoneX By mid-year, smaller value stocks had caught up and then some, widening the gap.

Here is why it matters. Value stocks tend to do better when the market is falling or gloomy. Growth stocks tend to do better when the market is rising and optimistic. Analysts put it this way: bull markets take the escalator up while bear markets take the elevator down. MarketWatch And right now, investors are gloomy. MarketWatch found that market sentiment was negative on average throughout 2025. MarketWatch

The broader question is whether this shift is permanent or just a temporary move. If value stocks mainly win when people are nervous, and people are still nervous, then the gap might not mean growth stocks are finished. It might just mean investors are parking their money somewhere safer until they feel better about the outlook.

A separate MarketWatch opinion piece argues that many U.S. stocks will look cheap based on past prices, but those old benchmarks will not be useful for a long time. MarketWatch For growth stocks in particular, a company can look like a bargain compared with its recent history and still be expensive if interest rates stay elevated — because higher rates make future profits worth less today.

The latest data from the Journal confirms the trend held. As of late July 2026, small-cap value kept its 23% lead against growth's 15%. WSJ The gap lasted through July rather than fading, which suggests the shift is not just a one-off adjustment.

One technical detail: MarketWatch reported that an index exited a bear market (a period of falling prices) on a Wednesday, rising 21.4%, with a level of 12,255.95 needed to confirm a new bull market. MarketWatch A 20% rise from a low is the standard line between a bear and bull market. An index climbing back that far while value leads growth by about 8 percentage points fits the pattern of investors favoring steadier, shorter-term holdings over growth bets.

For everyday investors, the practical impact is real. Anyone whose retirement account or portfolio was tilted toward growth stocks over the past few years is now lagging behind. The question is whether that drag continues — and the answer depends largely on whether investor sentiment improves. The negative mood from 2025, if it carries into 2026, is exactly the kind of environment where value stocks have historically kept winning.

The risk is that sentiment flips. If investors get optimistic again and that index holds above 12,255.95, the escalator dynamic returns and growth stocks take the lead once more. In that scenario, the 2026 value trade is less a permanent change and more a defensive stance against a gloomy market that has not yet fully resolved.