IVE hits 52-week high as value rotation accelerates in July

The iShares S&P 500 Value ETF climbed to a 52-week high Monday as investors rotated out of expensive growth stocks into cheaper value sectors, extending a shift that has reshaped equity market leadership over the past month.

"The market is finally rewarding the parts of the equity universe that have been ignored for two years," said David Kostin, chief US equity strategist at Goldman Sachs. "We see this rotation having further room to run as the macro backdrop shifts."

The Dow Jones Industrial Average posted fresh record highs last week, rising 2%, while the tech-heavy Nasdaq Composite added 3%. The S&P 500 is up 9% year to date, with all three major indexes in positive territory for 2026. The rotation out of semiconductor and AI names into financials, healthcare and beaten-down software stocks has been the dominant theme beneath the headline index gains.

The shift threatens to deepen losses in the AI complex, which had driven the bulk of the S&P 500's gains over the past 18 months. With the S&P 500 trading at 32 times earnings — roughly double its historic average of 16 times — investors are increasingly questioning whether growth stocks can justify their premiums.

What's Driving the Rotation

Three factors have converged to fuel the move into value. Federal Reserve Chairman Kevin Warsh suggested last week that inflation peaked in May, easing concerns about potential rate hikes before year-end. The June jobs report disappointed, with only about half the expected payroll additions and significant negative revisions to prior months. The unemployment rate fell to 4.2%, the lowest in a year, though that was driven partly by a post-COVID low in labor force participation.

Developments surrounding the Iran Memorandum of Understanding have also contributed. Brent crude fell to pre-war levels, and West Texas Intermediate crude entered the week at $70 per barrel, down $22 from the inflation-adjusted average for this date. Lower energy costs reduce input pressures across industrial and consumer sectors, benefiting value-oriented companies that tend to be more sensitive to input prices. The decline in oil also supports the broader disinflation narrative, reinforcing the case for the Fed to hold rates steady.

Where the Money Is Going

Financials, healthcare and select software names have been the primary beneficiaries of the rotation, while semiconductor and AI stocks have borne the brunt of selling. Palantir Technologies, one of the early AI highfliers, has fallen more than 40% from its 2025 high and now trades 24% below Morningstar's $153 fair value estimate, according to a July 2 note. The selloff in AI names has been broad-based, with the semiconductor index underperforming the broader market for three consecutive weeks.

The IVE ETF, which tracks the S&P 500 Value index, holds roughly $30 billion in assets and counts Berkshire Hathaway, JPMorgan Chase and Exxon Mobil among its top holdings. Its 52-week high shows that fund flows are increasingly favoring the value factor after years of growth outperformance. The S&P 500's current price-to-earnings ratio of 32.15, more than double the historic average of 16.23, suggests the broader market remains expensive on a comparative basis, giving the rotation further potential to run.

This week, investors will watch manufacturing data, oil inventory numbers and the minutes from the most recent Federal Reserve meeting for further clues on the direction of rates and the economy.

This article is for informational purposes only and does not constitute investment advice.