In a previous One Minute Market Insight we highlighted the sharp reversal in 2016 for Value vs. Growth-style stock performance, with Value stocks significantly outperforming last year following more than a decade of under-performance. It is a reversal that we believe has legs. The adjacent chart reveals that Value stocks have outperformed Growth over the long run, with the recent run in Growth being the longest on record.
That Value stocks tend to outperform makes sense: cheaper stocks are in a position to outperform expensive stocks over the long run.
Value stocks tend to be more economically sensitive, while Growth stocks tend to be companies that can grow earnings independently of the economy. Because global economic growth was soft in recent years, investors sought Growth. However, better economic performance overseas and the potential for U.S. economic improvement in response to tax and policy changes means it may be time for Value to shine.
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