Market Rotation Analysis: Growth-to-Value Shift Supports Bull Market Expansion

This analysis is based on the Seeking Alpha article [1] published on November 13, 2025, by Lawrence Fuller, which highlights a significant market rotation from expensive growth stocks to value-oriented sectors supporting a healthy bull market expansion.

The market rotation thesis presented in the article is strongly supported by current sector performance data. Value-oriented sectors are demonstrating clear leadership with Communication Services leading at +1.38%, followed by Basic Materials (+0.61%), Healthcare (+0.33%), and Industrials (+0.15%). In contrast, traditional growth sectors are underperforming with Technology down -0.81%, Consumer Cyclical declining -0.64%, and Real Estate falling -0.61% [0].

This sector rotation is reflected in major index performance divergence over the past 30 days. The Dow Jones Industrial Average, heavily weighted toward value stocks, has gained +3.32%, significantly outperforming the growth-heavy NASDAQ Composite’s +1.10% gain. The S&P 500 shows moderate gains of +1.23%, while the Russell 2000 small-cap index has declined -1.33%, indicating continued liquidity concentration in large-cap stocks [0].

The article’s historical analysis finds strong validation in external research. Since 1980, the Federal Reserve has reduced interest rates 13 times when the S&P 500 stood within 1% of its all-time high. In every instance, the S&P 500 delivered positive returns one year later, with an average return of 14.7% and median gain of 17.5% [2]. Current Fed policy aligns with this bullish historical pattern, with rate cuts totaling 1% in late 2024 and additional 0.25% cuts in both September and October 2025, bringing the fed funds target rate to 3.75%-4.00% [3].

The market rotation suggests improving market breadth, which is typically healthy for sustained bull market advances. The Dow’s significant outperformance (+3.32% vs. NASDAQ’s +1.10%) indicates that market leadership is expanding beyond the mega-cap growth stocks that dominated earlier rally phases [0]. This broadening participation could support more sustainable market gains.

ETF performance analysis reveals nuanced trends. While QQQ (NASDAQ 100 ETF) shows the strongest 60-day performance at +8.89%, it’s currently trading below its 20-day moving average ($619.42), suggesting recent consolidation after strong gains. SPY (S&P 500 ETF) demonstrates solid momentum with +6.65% gains and is trading above both key moving averages, while IWM (Russell 2000 ETF) underperforms with +7.69% gains but trades below both moving averages [0].

The rotation pattern aligns with historical precedents where Fed rate cuts near market peaks have supported continued equity advances. The combination of monetary policy easing and sector rotation creates a favorable environment for value-oriented investments while growth sectors undergo consolidation [1][2].

The analysis reveals several important risk considerations. Over-rotation risk exists if value sectors become overbought, potentially triggering a reversal back to growth stocks. The “broadening earnings growth” thesis depends heavily on actual earnings delivery from value sectors, requiring validation through upcoming earnings reports [1]. Value sectors typically carry higher debt levels and may be more sensitive to interest rate changes than anticipated.

Market structure concerns persist, with the Russell 2000’s underperformance (-1.33%) suggesting liquidity remains concentrated in large-cap stocks [0]. Higher volatility patterns in QQQ (0.97%) and IWM (1.20%) compared to SPY (0.71%) indicate continued market uncertainty, while QQQ trading below its 20-day moving average suggests potential near-term consolidation [0].

The current rotation creates significant opportunities in value-oriented sectors that are showing relative strength. Historical precedent suggests the Fed’s rate-cutting cycle near market highs could support substantial further gains, with the S&P 500 averaging 14.7% returns in similar scenarios [2]. The improving market breadth indicates a more sustainable advance than growth-driven rallies.

The divergence between Dow and NASDAQ performance presents tactical opportunities for sector rotation strategies. Communication Services’ leadership (+1.38%) and Basic Materials’ strength (+0.61%) highlight specific value sectors benefiting from current market dynamics [0].

Current market data confirms the rotation thesis with value sectors outperforming growth stocks across multiple metrics. The Dow’s 3.32% gain significantly exceeds the NASDAQ’s 1.10% advance over 30 days, while value-oriented sectors like Communication Services (+1.38%) lead performance [0]. Historical analysis provides strong support for the bullish outlook, with Fed rate cuts near market peaks preceding average 14.7% S&P 500 gains over the following year [2].

The Federal Reserve’s current policy trajectory aligns with favorable historical patterns, having cut rates by 1% in late 2024 and 0.25% in both September and October 2025, with market expectations anticipating additional cuts in December 2025 and throughout 2026 [3]. However, the sustainability of this rotation depends on earnings quality from value sectors and economic fundamentals supporting the “resilient growth” narrative [1].

ETF analysis shows mixed technical conditions, with SPY maintaining bullish momentum above key moving averages while QQQ consolidates below its 20-day MA after strong gains [0]. The Russell 2000’s continued underperformance suggests that while market leadership is broadening within large caps, small-cap stocks may face ongoing challenges.