Ben Jones, Director of Macro Research at Invesco
Valuation investing is back in vogue. After no less than 14 years of being outperformed by growth investing, the tables turned in 2021.
The change came amid the normalisation of interest rates at higher levels. As rates jumped, current earnings have become more valuable than future earnings, favouring value over growth.
"The important thing to stress is that those 14 years were very much the unusual period," says Ben Jones, Director of Macro Research at Invesco.
"And we're probably now moving into something that is more normal in nature, which means that value should become a more important factor again."
Tailwinds
There is a caveat, in that by some metrics it looks like growth has outperformed value in 2023.
However, the longer-term tailwinds remain in place, and Ben adds it is important to look under the bonnet even of this year's performance - some elements of the value bucket have performed very strongly.
"Sectors like energy have performed very well, only just lagging the IT sector; obviously with a degree of volatility. Japanese stocks have also done really well, and I would consider them to be in the value category still."
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