Value Stocks to Lure Investors During Grim Earnings Season

Investors are bracing for a miserable stretch of earnings reports that will likely extend the dominance of value shares as Corporate America grapples with high inflation and rising borrowing costs, the latest MLIV Pulse survey shows.

The broad view on stocks remains deeply pessimistic as earnings heat up this week, with most of the 424 poll respondents expecting the S&P 500 Index’s slide to deepen. The results signal no relief for equities already reeling from their biggest annual slump since 2008 amid a toxic mix of hawkish central banks, a strong dollar and the specter of recession.

Over half of survey takers said they’re inclined to invest more in cheaper, so-called value stocks, compared with only 39% three months ago. The sector’s outperformance versus growth last year was the greatest since 2000 as rising rates hurt expensive sectors such as technology by increasing the discount for the present value of future profits.

“We do believe that value names will outperform this season as those companies tend to be much more domestically focused and are benefiting from the pandemic recovery,” said Jay Hatfield, chief executive officer at Infrastructure Capital Advisors in New York.

US companies’ announcements start in earnest on Jan. 13 with results from major banks including JPMorgan Chase & Co. and Citigroup Inc.