As most investing veterans can attest, the market is forever changing. Certain sectors fall in and out of favor. Dividend yields rise and fall. Stocks as a whole wind their way through never-ending bull and bear markets. You can either adapt to these constant changes or hunker down for the long haul and ride them out.

Perhaps one of the market's most dynamic tug-of-wars is the one pitting value stocks against growth stocks. Growth names are a lot of fun to own -- right up until they're not. Then they're downright painful to stick with. That's often when value stocks find favor again.

Given how much growth stocks have outperformed value stocks since 2018, it would be easy to assume it's time for value stocks to shine. Higher interest rates bolster this argument.

This is a case, however, where the right move might actually be sticking with growth stocks, or even adding to your exposure. The iShares S&P 500 Growth ETF (NYSEMKT: IVW) will do nicely. Even a modest $500 investment in it is enough to matter, at least as a starting point.

The growth vs. value rotation argument

Don't misread the message. There will come a time when value names are a better proposition than growth. But that time isn't now.

Most of the value-favoring underpinnings are in place. Chief among them are interest rates. Growth companies thrive on cheap capital, but they think twice before borrowing money at a higher cost. Most companies in typical value sectors like consumer goods or utilities don't care so much. They're accustomed to thin profit margins and relatively high borrowing costs. Indeed, higher interest rates often beef up value stocks' dividend yields.

There's also the not-so-small matter of valuation.

While growth stocks typically trade at earnings multiples far greater than those of value names, their current disparity is enormous. The iShares S&P 500 Growth ETF's trailing price-to-earnings ratio currently stands just above 40, versus the S&P 500's (SNPINDEX: ^GSPC) trailing earnings multiple of less than 25. The iShares S&P 500 Value ETF's (NYSEMKT: IVE) trailing price-to-earnings ratio right now, for comparison, is only 21. As Morningstar's chief U.S. market strategist Dave Sekera recently commented: "[W]hen you go back prior to 2019, you can still see that on average value stocks typically don't trade at this much of a discount to the broad market."

There's a slight hitch with this line of reasoning, however.

There's no time limit on growth

The market doesn't always behave as it's supposed to. In other words, just because growth stocks have performed so well for so long while value stocks have lagged doesn't necessarily mean a rotation is in the offing. Plenty of pundits have been predicting this rotation for over a year now. It's yet to happen.

What gives?

The philosophical explanation: Although every category of stocks ebbs and flows, it doesn't necessarily do so according to a pre-set schedule. The market's economic backdrop is never exactly the same twice. We can't know for sure how certain stocks should perform at any given time.

Then there's the more tangible explanation for the current (and unlikely) scenario persisting into the foreseeable future. That's the advent of artificial intelligence, and the sweeping changes it's already driving.

Simply put, the world will never be the same again. Enterprises of all sizes and types can now punt a great deal of predictive work to AI platforms to come up with better -- and faster -- solutions to problems than people ever could on their own. We don't yet know how game-changing artificial intelligence could be for all industries. We only know enough to know it's a game-changer. As Microsoft founder and former chief executive Bill Gates put it: "The development of AI is as fundamental as the creation of the microprocessor, the personal computer, the Internet, and the mobile phone."

Only a relatively small number of companies are in a position to help drive these changes. Nvidia is one of them, building the processing hardware needed on this front. Microsoft is another, offering AI software and services to enterprises ready to make more use of their mountains of digital data. Alphabet and Facebook parent Meta Platforms are a couple of other important names in the artificial intelligence race.

Now care to guess four of the iShares S&P 500 Growth ETF's top six holdings? Yep. Those four stocks. Apple and Amazon are the other two, and both of them are also key players in the AI arena.

It's always been a case-by-case matter

This won't always be the case, of course. There will come a time when AI is just another industry, deflating most other growth industries once that slowdown takes shape. Value stocks will have their day in the sun again, sooner or later.

That day isn't anywhere on the horizon, though.

Look for the AI evolution to continue leading technology stocks for the indefinite future, bringing most other growth stocks with them. This force is bigger than any bearish or bullish effect from interest rates or inflation. Something simple like the iShares S&P 500 Growth ETF would be a great way to plug into it.

The bigger takeaway for investors is that stocks don't fall in or out of favor simply because their current trends have lasted too long and are seemingly ripe for a reversal. Every one of your individual stock picks should be made on a case-by-case basis, with the bigger picture (like this one) in mind.

Should you invest $1,000 in iShares Trust - iShares S&P 500 Growth ETF right now?

Before you buy stock in iShares Trust - iShares S&P 500 Growth ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and iShares Trust - iShares S&P 500 Growth ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $845,679!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of October 14, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. James Brumley has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

1 No-Brainer S&P Growth Index Fund to Buy Right Now for Less Than $500 was originally published by The Motley Fool