Are value stocks poised for a comeback?

For the past decade, the competition between growth and value stocks has been decidedly short on suspense — growth has consistently come out on top. But value stocks recently disrupted this storyline with a rousing rally. Was this simply a blip? Or was it a preview of a lasting rotation?

Below, Brian Levitt, Invesco’s Global Market Strategist for North America, and Talley Léger, an Invesco Investment Strategist who specializes in the equity markets, discuss whether the conditions are right for a longer-term shift to value.

Brian: The last time we wrote a blog together, I asked you if the inverted yield curve was keeping you up at night. That was back in September, and neither of us seemed to be losing sleep. We reasoned that the inverted yield curve was reflective of multiple policy mistakes — the 2018 Federal Reserve (Fed) rate hikes and the ongoing uncertainty of the trade war — and that the curve would steepen modestly amid a better policy mix. Fast forward to today: The Fed has been easing policy and there are hints of incremental progress on trade. The yield curve is no longer inverted, and US stocks have been hitting all-time highs.1

A funny thing happened on the way to those all-time highs. The markets, which had been led by growth stocks for the past decade, were briefly led by value stocks.2 Was that just a short-lived rally or a hint of a longer-term shift to come?