Macro Research Value stocks are back in favour. Time to add V | FSMOne SG - Research Highlights

Macro Research

Value stocks are back in favour. Time to add Value exposure.

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• Value remains supported by the inflation backdrop. On the basis of elevated price pressure and upside risk to inflation, Value can outperform growth. The former tends to outperform i) during periods of high inflation and ii) rising policy rates.

• Despite moderation in global growth momentum, we see growth catalysts down the road, mainly from fiscal impulse and Asia’s re-opening. The reopening wave should also put Value in the spotlight again.

• Relative valuation remains attractive. Value continues to trade at a wide discount to Growth. At such an extreme level, there is room for the value rotation to run and for the discount gap to close. Earnings momentum supports further Value rotation.

• Considering our view on Value and Growth, we recommend investors to review their portfolio exposure. If their portfolios are skewed towards Growth, especially the unprofitable and over-valued stocks, they should diversify away and add Value exposure.

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