By Michael Msika, Bloomberg Markets live reporter and strategist
This year’s competition for equity market leadership appears to have ended, with growth stocks scoring a decisive win over their value rivals.
The two equity categories jostled much of this year to take the upper hand, as investors struggled to decipher the outlook for interest rates and economic growth. No longer. Fund managers are rushing now for growth-oriented sectors such as technology, convinced of a soft landing for the US economy, with slowing inflation and falling bond yields. The result is a clear outperformance for growth strategies since the start of November, feeding a hot streak in world markets.
However, growth equities come at a cost, especially as their earnings profile has underwhelmed in recent years, relative to value. That’s left the group trading at hugely expensive valuations, with a premium of more than 60% to the overall market. And compared to value, growth is twice as pricey.
“Lower yields are good for long-duration stocks.” says Oddo strategist Thomas Zlowodzki, predicting the rally to extend if yields continue to fall. Gains are unlikely to be curbed by signs of an economic…
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