Value investing seems to have lost some of its appeal. Compared to growth stocks, its underperformance run is the longest over the past four decades and has persisted since the 2007 crisis. A recent report from J.P. Morgan is shining light on the structural headwinds causing trouble. They claim that technology is a big one – the so-called legacy market leaders haven’t fully jumped on board the automation and social media trend, suffering both poor fundamental and market share declines by disruptors…
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Value investing seems to have lost some of its appeal. Compared to growth stocks, its underperformance run is the longest over the past four decades and has persisted since the 2007 crisis. A recent report from J.P. Morgan is shining light on the structural headwinds causing trouble. They claim that technology is a big one – the so-called legacy market leaders haven’t fully jumped on board the automation and social media trend, suffering both poor fundamental and market share declines by disruptors. Index investing in passive instruments has surged, taking away the appeal of stock by stock fundamental value hunt. Long periods of cheap debt and loose monetary policy has also led to favouring growth stocks. All the above is further fuelled by the slowest economic recovery since WW2 and a move to bond proxies. For a bounce-back in value strategies, J.P. Morgan suggests the following conditions are needed: regulations that foster competition, saturation of passive funds, less political uncertainty and the return of the business cycle (i.e. a downturn).
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)