Value Trade Crumbles on Wall Street, Putting Quant Funds at Risk
If Wall Street is right, the big revival in value investing in the post-lockdown era is in danger of falling apart all thanks to the resurgent bond market.
Strategists from JPMorgan Chase & Co. to Wells Fargo & Co. warn that the best days may now be over for cheap-looking stocks as investors dump the likes of oil producers and banks on the conviction that inflation has peaked.
With traders wagering that an economic slowdown will cool historic price pressures, a long-short value trade has dropped 13% since the mid-June high point in bond yields.
At the same time, companies touted for their above-average potential to expand profits, known as growth stocks, outperformed their value counterparts by the most in 22 years in July, MSCI indexes show, after Big Tech names from Apple Inc. to Amazon.com Inc. rebounded.