While it’s true that we fancy smaller, less-expensive and more profitable companies, those preferences have not been shared among the bulk of investors over the past decade. With relative performance as testament to that fact, investors have been rather more interested in pulling forward the longer-term potential of growthier names. But history generally has been hostile to a growth focus, and we expect the longer-term future to prove little different:

• If companies ultimately are worth their long-term earnings, richly valued stocks present a much higher bar for future excess return relative to the broader market than do less-expensive stocks
• Much of the recent performance difference has come from expanding multiples for large-cap and Growth stocks
• The relative valuations of small-cap and Value stocks have trailed those of their peers by a growing margin, bolstering support for positioning in favor of those characteristics