Ned Davis Research has an interesting tidbit today in favor of the recent shift in client portfolios from value to growth. As noted in this chart, investors within Fidelity’s mutual fund complex currently have fewer dollars invested in growth funds than anytime since 1992. This seems like a good contrary indicator especially in light of the fact that the trend indicators in Northlake’s Style model are already picking up the improved performance of growth relative to value that has been in place since May 2005.
It seems there is plenty of money available to shift back towards growth and drive further positive relative performance. My reading of Wall Street commentary makes me believe that a similar underweighting of growth exists at many institutions and hedge funds. Remember no model or indicator is perfect and Northlake’s new growth signal is a weak one, however, it appears a good trading setup is in place to support the fresh growth signal.