• Investment Insights
  • Client Newsletters & Events
  • Message Board

Playing Defense with Growth Stocks (That’s Right, Defense)

By: Stephen Duench, Vice-President and Portfolio Manager, AGF Investments Inc

One of the defining aspects of the equity market so far this year has been the outsized returns of growth stocks. In June alone, the S&P 500 Growth Index gained almost 10% more than the S&P 500 Index, marking its best month of outperformance against the broader market in 14 years, according to AGFiQ data.

But what is perhaps just as remarkable—and yet less recognized —is the fact that growth can now be characterized by its defensive attributes as much as anything else.

Indeed, our analysis shows several factors that are synonymous with growth stocks have recently experienced significant deviations in their market betas, which, in the past, have hovered near or at 1 on average. For example, momentum and forward earnings growth currently have rolling three-month betas of 0.65 and 0.69, respectively, but these scores were also as low as 0.59 and 0.5 in early June.

Three-Month Rolling Beta of Forward Earnings Growth

Growth Beta line graph

Source: AGFiQ with data from FactSet as of July 9 2020. Thirty-day beta calculation for custom factor composites relative to S&P/500. Factor composites are a proprietary mix of alike factors and measure solely with the S&P/500 universe.


In other words, both factors have become far less volatile in relation to the overall market than would normally be the case. And while it isn’t unheard of for growth-like characteristics to have betas that are well below 1, it is rare—especially when taking into consideration the current betas of other factors like value and dividend income that have increased just as uncharacteristically to current scores well above 1 in recent weeks.

Beta Spread between Forward Earnings Growth and Deep Value

Growth Beta deep spread chart

Source: AGFiQ with data from FactSet as of July 9 2020. Thirty-day beta calculation for custom factor composites relative to S&P/500. Factor composites are a proprietary mix of alike factors and measure solely with the S&P/500 universe.


As a case in point, the beta spread last month between forward earnings growth and deep value was the most extreme its been in over two decades. Moreover, the only other time it was anywhere close to this divergent was in the early part of 2009, right before the value-fuelled start to the bull market in equities following the Great Financial Crisis.

Of course, that doesn’t mean growth’s reign as an outperforming, defensive juggernaut can’t continue, but like most other market deviations of this magnitude that have come before it, there’s a high probability that it will end sometime soon rather than later.

Stephen Duench is Vice President and Portfolio Manager, AGF Investments Inc. He is a regular contributor to the Insights and a member of the Highstreet Pooled Funds Investment Team.


The views expressed in this article are those of the author(s) and do not necessarily represent the opinions of Highstreet, AGF Investments Inc, or any of its affiliated companies, products or investment strategies.

The commentaries contained herein are provided as a general source of information based on information available as of July 17, 2020 and should not be considered as investment advice or an offer or solicitations to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication, however, accuracy cannot be guaranteed. Investors are expected to obtain professional investment advice.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

AGFiQ is a collaboration of investment professionals from AGF Investments Inc. (AGFI), and AGF Investments LLC (AGFUS), a U.S. affiliated registered adviser. This collaboration makes up the quantitative investment team.

Effective January 1, 2020, all members of the Highstreet Pooled Funds Investment Team are employees and registrants of AGF Investments Inc., Highstreet’s parent company. The Highstreet Pooled Funds are investment vehicles offered exclusively to clients of Highstreet Asset Management Inc.

Additional Insights:

Three Options for De-clawing a Bond Bear by David Stonehouse

Combine Factors the Right Way by Mark Stacey


Capitol Insights banner

Message from Michael Hodgson

Michael Hodgson Managing Director, Private Client
Michael Hodgson
Managing Director, Private Client

Welcome to 2021! As we begin a new year and I put the finishing touches on this newsletter, it is difficult not to reflect on the recent unprecedented invasion of the U.S. Capitol building in Washington. Just when we thought our world could not get any more surreal, we experience scenes of mob rule in an elected assembly which was trying to count the Electoral College votes from November’s general election and sort out any challenges to the outcome. Ultimately, of course the mob was brought under control and the Congress was allowed to do its work.

Read More


Private Client Newsletters

Current Issue

December 31, 2020

Previous Issues

September 30, 2020

June 30, 2020

March 31, 2020


Highstreet 10th Annual Investment Conference (Replay)

In light of what has been a challenging year on many fronts – from a global pandemic to global market volatility – Mark Stacey, Stephen Duench and Greg Valliere provided insights on how the team has navigated 2020, the impact of the U.S. electoral results, and their view going forward.

Watch Replay

Updated Offering Memorandum and Statement of Policies

Updated copies of the Highstreet Pooled Funds Offering Memorandum (July 2020) and Statement of Policies (December 2020) is available directly via the client portal. Alternatively please contact your relationship manager to receive a copy.

Registered Plans

Group Retirement Savings Plan Declaration of Trust

Retirement Income Fund Locked-In Addendum

Retirement Income Fund Declaration of Trust

Retirement Savings Plan Declaration of Trust

Retirement Savings Plan LIRA/LRSP Addendum

Tax Free Savings Account Declaration of Trust