The value style of investing outperformed significantly in 2016, but growth-oriented investment strategies have been doing better so far in 2017. Thus, many investors are wondering whether the value upswing was just a passing fancy, and if growth is here to stay.
We identify and explore the main drivers of the style cycle:
- The rotation between growth and value strategies
- Government policies that are supportive of economic growth
- Earnings expectations
Investors can use this simple, transparent framework to identify potential inflection points in the style cycle.
Animal spirits and the ‘soft’ macro data (e.g., business and consumer sentiment surveys) have provided strong tailwinds for U.S. equities. For the rally to continue, we likely need fundamental follow-through in the ‘hard’ macro data (e.g., nominal GDP, sales, and earnings). On that score, we think policy support is a crucial link in the chain of events leading to a durable value regime.
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Investments in securities of growth companies may be volatile. Value investing involves the risk that undervalued securities may not appreciate as anticipated.
Mutual funds and exchange traded funds are subject to market risk and volatility. Shares may gain or lose value.
These views represent the opinions of the author at OppenheimerFunds, Inc. and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the publication date, and are subject to change based on subsequent developments.