At long last, value stocks are back—but for how long? Morgan Stanley’s Quantitative Equity Research team looks at whether the trend has staying power.
Morgan Stanley – The former wallflowers of the market—value stocks—are suddenly the belles of the ball. After more than a decade of underperformance, both the Russell 2000 Value Index and the Russell 1000 Value Index were recently beating their respective growth indexes by more than 10 percentage points this year.
Chalk it up to increased optimism that some of the hardest-hit parts of the economy are poised for recovery, along with expectations for higher inflation and rising yields, which make pricier growth stocks less appealing.
The question now is whether the value trade has staying power. A recent analysis by Morgan Stanley’s Quantitative Equity Research team suggests that there’s more to the story than the usual value vs growth debate—and that different factors, sectors and securities within value haven’t reached their full potential.
“We think these moves are indicative of a broader growth-to-value rotation and expect more upside for value factors in the near term,” says Boris Lerner, Global Head of Quantitative Equity Research. “The value trade is here to stay, at least for the time being.” more>