Its been a strong first half for the value trade.

The iShares S&P 500 Value ETF (IVE) is beating the iShares S&P 500 Growth ETF (IVW) in 2021, up 16% versus growths 10% gain. Small- and mid-cap value stocks have been particular standouts, outpacing their larger counterparts in recent months.

Growth has spent years in the lead as investors held onto more traditional, market-cap-weighted exchange-traded funds, and the recent switch represents a change in the calculus, said Dave Nadig, chief investment officer and director of research at ETF Trends.

The flip that weve seen where some of the small-cap or mid-cap value plays have started to catch investor attention means a lot of those individual stocks are now showing up in momentum ETFs and funds. Thats going to really change the dynamics here, Nadig said Monday on CNBCs ETF Edge.

I think we are in a bit of a rotation, he added. A lot of it is because theres no alternative market. Investors and advisors are really sticking to the equity markets.

Longtime value hunter Gerard OReilly, the co-CEO and chief investment officer at Dimensional Funds, said small-cap and value plays have shown notable outperformance over the past 12 months.

Theres a reason those stocks have lower prices and investors demand higher returns in terms of holding them, OReilly said in the same ETF Edge interview.

Though growth has won out over the last five, 10 and 20 years, some of those returns were largely unexpected, he said, citing growths roughly 20% annualized return over the last decade.

When youre investing, youre investing based on expectation, he said. If something is unexpected, it doesnt mean that the expected return of growth stocks going forward is 20%, it means they got unexpectedly lucky or an unexpectedly good windfall which may be because of the Fed or may be because of other reasons.

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