Value or growth? 'Too much debt' likely to cause transitory environment

Many factors at play

Lauren Mason
clock • 9 min read

Equity investors could experience a "multi-year rally" in value stocks, according to some industry commentators, who believe the recent market rotation out of growth could be here to stay. Others have warned not to write off quality growth assets, however, given strong fundamentals and the fact there is "too much debt in the system" for central banks to upset the applecart.

Over the past decade, high-quality growth stocks have significantly outperformed their value counterparts following years of accommodative monetary policy. Data from FE fundinfo shows the MSCI ACWI Growth index has returned 310% over the last ten years to time of writing (17 January 2022), compared to the value index's gains of 160.2%. While a market rotation out of growth and into value stocks reared its head at the beginning of 2021, following the roll-out of Covid vaccination programmes globally, it proved fleeting, with growth indices returning to pole position within a few weeks.  ...

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