So far this year, Value stocks have tended to outperform Growth stocks outside the U.S., while U.S. equities have remained more Growth-led, underscoring that the Value–Growth debate is increasingly regional and regime-dependent rather than a single global trade, as seen in Exhibit 1. Against a backdrop of geopolitical disruptions that are impacting the global economy and spilling through  trade routes and energy markets, investors could consider the macro foundation that supports style performance, especially the path of inflation and interest rates. 

Value stocks could help to hedge rising rates

On that macro channel, Value stocks look increasingly attractive as a defensive buffer during this time of uncertainty. Persistent sell-offs in long-dated sovereign bonds, notably in Japan and the U.S. (where 10-year yields have risen by around 60 and 30 basis points as of end of May year-to-date, respectively), are consistent with markets repricing toward a longer-lasting inflation/high-rate environment. That matters because higher and more volatile rates tend to be bad news for Growth stocks, which prefer lower rates for easier debt servicing and the ability to finance expansion cheaper. In regions such as Japan, where the interaction between the yield curve and style performance is drawing attention, the case is that Value may have room to regain ground if rates remain structurally higher and the curve dynamics stay supportive.

At the same time, the Growth story has not gone away. Expectations are still being reinforced by strong earnings projections in areas with durable long-term narratives, particularly software services and artificial intelligence (AI), but also in tangentially related areas such as energy-linked technology and infrastructure. Even if the macro story and interest rate environment are seen as less friendly, Growth can still win when earnings delivery is strong enough and when investors are willing to pay for long runway business models.

Value alone may not be sufficient

Valuations are the other pillar of the debate: Value is cheaper than Growth (Exhibit 2), and has been for the last several years, current valuations are at a -42% discount. However, cheapness alone is not a catalyst, and investors should keep in mind that it can be a trap. The central risk is the classic “value trap,” where stocks can look statistically inexpensive, yet they are cheap for the wrong reasons, such as poor governance or structural headwinds. As earnings growth broadens, a practical way to participate without relying on a single style regime is to emphasize quality factors, where investors could focus on companies with stronger balance sheets and more consistent profitability to help filter Value (to avoid traps) or as a risk-control overlay on Growth (to dampen drawdowns when rates spike).

The cycle backdrop ultimately determines which narrative dominates. In an expansion/recovery phase, Value has historically been a top-performing factor set, and there is incremental support in parts of APAC from corporate reform efforts in economies such as Japan and South Korea, where programs aimed at better capital allocation and higher shareholder returns can drive re-ratings, where there is meaningful “multiple expansion” headroom. But in a slowdown phase, Value has historically tended to underperform as market breadth narrows and investors crowd into more defensive factors like low volatility and quality—a reminder that “Value works” is often conditional on not slipping into a Growth scare.

Geopolitics is acting less like background noise and more like a direct style driver. Tensions in the Middle East, particularly threats around key chokepoints like the Strait of Hormuz, can spark energy-led Value outperformance and create “geopolitical inflation scares” that weigh on Growth valuations via higher expected rates. The commodity angle cuts both ways: The payoff to commodity Value can be attractive under structural demand and supply disruptions, but it also introduces vulnerability for oil-importing economies like India and the Philippines, where energy shocks can pressure margins and debt-servicing capacity.

Given today’s combination of geopolitical risk and rate uncertainty, Value has a stronger near-term argument as a defensive anchor, especially outside the U.S. and in reform-driven APAC pockets. Ongoing tensions in the Middle East could benefit some Value sectors. Energy build-outs, infrastructure projects supporting industrials, higher interest rates benefiting banking, and increased defense spending are all expected to benefit from this current environment. The defensiveness of Value and higher dividends may help provide some cushion against volatility. Growth remains compelling where earnings expectations are exceptionally strong, such as AI-driven stocks. A balanced conclusion is that the “winner” is less about choosing a label and more about owning Value selectively, keeping exposure to structurally strong Growth earners, and using quality as the portfolio’s stabilizer, while staying honest about where we are in the expansion-versus-slowdown cycle.

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