Some useful graphs on the value and growth issue from Shroders that may not answer all investor questions on the topic but provide some use insights to add to the debate.
1. The value over growth story does not show a strong relationship with real rates of interest. The current correlation is high, but the majority of observations show real rate have almost a flat relationship with the value growth correlation.
2. Value will increase especially when there is a large increase in real rates or a strong decline in inflation expectations like we had in the last quarter. It is the change not the level that seems to have a greater impact which suggests a business cycle adjustment as a key driver.
3. The value and growth effect cannot be separated from industry or style characteristics. Value will switch between cyclical and defensive stocks. Right now, there is a surge in cyclical exposure in the value space. Again, this seems to be suggestive of a business cycle link.
4. Value will strengthen when there is a surge in EPS. In this case, value significantly underperformed before the EPS inflection and has done better than normal in the post inflection period.
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