Through 2026 so far, the Russell 1000 Value Index has outperformed the Russell 1000 Growth Index, extending a shift that began in late 2025 and has since been reinforced by changes in how the largest companies are classified within these indexes (State Street Global Advisors).

For context, the Russell 1000 tracks the 1,000 largest U.S. stocks. It is split into a Growth index and a Value index based on factors like price-to-book ratios and earnings growth. When a stock's profile shifts, it can move between the two.

The divergence is not a narrow, recent phenomenon. From early November 2025 to early February 2026, the Russell 1000 Value Index advanced 8.6% and outperformed the Russell 1000 Growth Index by 14 percentage points over that window (Bloomberg). A spread that wide, compressed into roughly three months, is the kind of gap that forces fund managers who track these benchmarks to adjust their holdings.

Small-cap stocks have amplified the story. For the one-year period ended June 30, 2026, the Russell 2000 Index — which tracks smaller companies — returned 40.8%, nearly double the Russell 1000's 22.0% over the same period. The Russell Microcap Index, covering even smaller companies, gained 58.5% (Royce Investment Partners). In the first quarter of 2026 alone, the Russell 2000 Value Index returned 5.0% (Columbia Threadneedle). The size and value factors, in other words, have been working in tandem.

The June 2026 Russell reconstitution added a structural layer to the rotation. Each June, FTSE Russell recalculates which stocks belong in which indexes and how they are classified. Preliminary results indicated that 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, style scores for Amazon, Apple, and Microsoft migrated into value territory (ETF Database).

This migration did not happen in isolation. At the June 2025 reconstitution, minority portions of Amazon.com, Meta Platforms, and Alphabet were added to the Russell 1000 Value Index (Morgan Stanley Investment Management). The progression from partial value inclusion to fuller value classification for these names tracks a steady shift in the style characteristics of the largest growth benchmarks. T. Rowe Price noted that during the June 2026 reconstitution, Apple, Amazon.com, and Microsoft were projected to see their weightings in the Russell 1000 Growth Index decrease (T. Rowe Price).

The mechanics here matter for anyone managing against a Russell growth mandate. When a megacap name's style score crosses the value threshold, its growth-index weighting is mechanically reduced and its value-index weighting increases, regardless of fundamentals. Passive growth strategies sell; passive value strategies buy. The reconstitution forces the trade. And when the names involved are among the largest weights in the index, the flow effects are non-trivial.

The broader context is that two distinct forces have been converging on the value factor. The first is performance-driven: small-cap and value indices have been delivering returns that materially exceed their growth and large-cap counterparts over the trailing year. The Russell Microcap's 58.5% one-year return, in particular, reflects a risk appetite that has extended well beyond the megacap cohort that dominated market leadership in prior years. The second is structural: the style classification system itself is reassigning the most consequential megacap names toward value, which means passive flows are now amplifying the same rotation that active managers have been navigating.

For benchmark-sensitive institutional investors, the practical implication is that growth index exposure has become less concentrated in the names that historically drove its returns, while value index exposure has become more concentrated in those same names. An investor holding a Russell 1000 Growth passive product at the June 2026 reconstitution ended up with less Apple, Amazon, and Microsoft than before, while a Russell 1000 Value passive product holder ended up with more. The style box is being redrawn around positions that may not have changed in the portfolio, only in their classification.

Whether the value rotation sustains depends on variables the index reconstitution does not address. Style migrations are backward-looking, computed on characteristics like price-to-book, earnings yield, and growth rates as of the reconstitution date. They do not forecast. The performance data through June 30, 2026 captures a specific regime of small-cap and value outperformance, and the year-to-date value lead confirmed by State Street on July 27 extends that trend into the second half. But the trailing one-year figures will eventually roll off, and the megacap style scores that crossed into value territory could cross back if price action reverses.

What is verifiable is that the rotation is not a single-quarter artifact. 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 style drift in the index construction system is aligned with the factor performance in the market. That alignment is what makes the current environment unusual, and worth monitoring.