Equity Investing: A Strategic Mindset for a Changing World
So why did US value stocks underperform in 2023 when inflation and interest rates were still high? The main reason was because investors flocked to a small group of megacap stocks seen as the big beneficiaries from AI. Concerns about economic growth magnified the megacaps’ drawing power. Outside the US, value stocks in Japan and emerging markets outperformed in 2023, while in Europe, value returns were in line with growth.
We think investors haven’t fully internalized the long-term trajectory of interest rates. As investors realize that rates are unlikely to go back to zero, we believe the duration effect could reignite value stocks that have lagged in recent years and broaden the sources of return potential for equity…
