MacroResearchBoard

Financials And Tech Will Be Key Drivers Of Style Performance – April 19, 2021

A just-published report examined the outlook for value versus growth stocks in the context of the recent sharp shift in relative performance. We concluded that global value stocks should outperform growth stocks as the global economic recovery gathers pace. There were a number of factors supporting this view:

• Value stocks’ earnings and valuations are depressed relative to their growth counterparts, both of which should shift in value’s favor in the year ahead.
• The relative performance of the style factor will hinge significantly on the comparative performance of financial stocks, which are heavily concentrated in the value index, and technology stocks, which dominate the growth index. A resumption in the uptrend in global bond yields will benefit financials versus technology.
• Notwithstanding the expected outperformance of value stocks relative to growth stocks on a 6-12 month horizon (and potentially longer), our long-standing view is that country and sector factors are a more useful to guide overall and regional equity strategy within multi-asset portfolios, rather than a value/growth style preference.