Value Can Defuse Concentration Risk
The value of value relative to growth is back to historic highs, being driven by the extreme concentration of the top seven stocks in the S&P 500 Index. The combination of expanding equity multiples and higher interest rates in 2023 has overshadowed growing risks and created an environment reminiscent of 1987’s “Black Monday”. Value provides investors strong advantages in the face of these growing extremes, offering the potential for downside protection against market declines as well as compelling relative return potential on a decrease in market concentration.
Still Far to Go in New Value Cycle
- We are in the early stages of a new market cycle characterized by higher volatility, inflation and interest rates and
creating conditions where value stocks thrive.
- New market cycles are characterized by future leaders beginning extremely cheap, and valuation spreads remain at historic highs despite two years of strong performance.
- As investors recognize there is no return to the pre-COVID growth cycle, value stocks will shift toward historically normalized levels, creating compelling opportunities for investors.
The Value of Value is Still Compelling
Market cycle arcs persist until completed, and there is still a long way to go in favor of value.
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What’s Good for the Chinese Consumer Is Good for Investors
The so-called “Trade War” between the United States and China has US investors scrambling for a new answer, and it may just lie in China’s consumer-friendly, high-growth opportunity market. But is there enough upside to make the volatile risk more worthwhile?