No. of Recommendations: 18
It think there are several separate issues going on here.

One is the definition of "value" you use.
The definitions used in the index definitions underlying popular ETFs are silly.
For example, low sales growth is a predictor of a bad business, not one that's undervalued.
They are seeking bad companies as much as they are seeking undervalued ones.
So, any conclusions or headlines on those ETFs or indexes can be safely ignored, at least in terms of magnitude.

But say you start with a slightly more sane (if limited) definition of "value" as low P/E firms.
These too have been unusually poor performers lately compared to history, on a relative basis compared.
(bottom 20% of VL stocks by P/E outperformed the S&P 500 by +13%/year 2000-2013, but underperformed by -3%/year 2015-2018).
But consider:
Some firms have low P/E ratios for a good reason. Poor prospects for growth of the business, mainly.
Others have low P/E ratios due to random variation in prices. The market is just in a bad mood.
Any given low P/E firm my be in that category for either or both of those reasons.

The outperformance of value strategies relies entirely on the second one: things that are not just cheap, but also are cheaper than they deserve to be.
So, we can see wide dispersion of P/E ratios these days, but perhaps (?) a relatively low frequency of *unwarranted* low P/E ratios.
That would cause the "value outperforms" rule to get broken.
The bargain bin has been so thoroughly picked over that it's almost entirely broken stuff.
A lot of the "value" investors out there may be using dumb criteria, but they're capable of buying firms with low P/E ratios.

A market disruption is likely to change this.
The mood of the markets gets pretty irrational sometimes.
People sell what they CAN sell (often what has dropped least), rather than what they should or want to sell.
And fewer people will have the cash to pick over the bargain bin, letting it fill up with a better variety of goods.

Jim
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