The Weekly Brief
Thought of the week
After a strong start to the year, value stocks have faltered relative to growth stocks since May as bond yields have fallen. In our latest publication – Value is back, but growth is not out – we dig into the key conditions that have historically been necessary to drive periods of value outperformance. Both strong real GDP growth and rising inflation expectations are typically helpful, but the latter appears to matter more. The global shift to more active and expansionary fiscal policy is increasing the likelihood of both higher growth and higher inflation ahead. For investors looking to build more resilience to inflationary risks into the equity allocation of their portfolios, a bias towards value stocks has historically helped.
Rising inflation expectations would favour value stocks
15y correlation of style/region rel. performance with US 5y5y inflation swap yield