Value

Value stocks have been big outperformers over the past three years, especially those in the cheapest part of the market, says Schroders’ Simon Adler. To avoid value traps, it’s key to do one’s research.

US technology stocks have suffered steep losses over the last year as interest rates have marched higher. But with the Fed now signalling reductions in future rate hikes, value could emerge in tech stocks with strong fundamentals.

The 91-year old’s often contradictory quotes bely a strong central message; regularly taking stock of your portfolio is a highly valuable habit.

Following two years of volatility, triggered by a global pandemic, supply-chain disruptions and the release of massive stimulus that followed, the financial system is in uncharted territory.

The beginning of 2022 has marked a significant shift in the market paradigm, with the multi-decade tailwind of falling bond yields, which supported the valuation of ‘long duration’ assets like growth stocks, turning into a headwind. The impact has been far swifter than many expected.

With US quarterly reporting season nearly wrapped up, the trend is showing that earnings were better than expected this quarter.

Among the most interesting comments I’ve heard thus far in 2022 was from an actively managed global fund manager who said something along the lines of “the challenge in 2022 won’t be in outperforming the index, but rather in generating a positive return.” This was evidenced by renowned value manager Platinum’s quarterly results, released last week.

While value has been the winner of the recent market rout and growth the loser, a zealous adherence to either style could see managers burned by economic downturn.