In his latest article titled – Did I Miss The Value Turn?, Rob Arnott and associates discuss whether the recent value rebound, cresting in May, is over or is the start of a bigger rebound. Here’s an excerpt from the article:
All indications are that 10 years from now Covid-19 will be an awful, but fading memory, with the virus having morphed into yet another strain of seasonal flu, against which most of the world’s populace will have attained some measure of resistance.
In May and June 2021, the value turn that started in September 2020 gave back over half its gains as the third Covid wave swept the globe. The good news is that value is still remarkably cheap with discounts relative to growth at near-historical highs. Value was only ever cheaper relative to growth in the summer of 2020—not even during the height of the tech bubble.
The demonstrated effectiveness of vaccines, particularly in reducing the risks of hospitalization and mortality, should continue to boost the major global economies. Worldwide economic strength should accelerate as the emerging markets and other regions that were slow to vaccinate their populations make significant progress on that front. The cyclical sectors of the economy, and consequently value investors, should benefit. When peak fear rules investors’ mood, as is currently the case for value strategies, it’s time to buy, not sell.
In the seven years that followed the bursting of the tech bubble in 2000, value more than doubled relative to growth, chalking up over a 100% relative performance gain! Might the value rebound already begun rival or even exceed the 2000–2007 experience? We see it as being entirely possible and would be more than happy with only half as much relative outperformance!
Value is also cheap on an absolute level. When most liquid asset classes are set to deliver a negative or near-zero real return, value stocks standout as the only asset class likely to generate a 5%–10% real return over the coming decade. We may never again see a better opportunity to buy value stocks.
You can read the entire article here:
Rob Arnott: Did I Miss The Value Turn?
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