John Bennett, Director of European Equities, discusses why investors should not take a binary view on the value/growth debate and explains why he thinks the worst is yet to come for financial markets.
- We expect value stocks to have the upper hand on growth stocks as the cost of money continues to rise, putting pressure on hypergrowth-style businesses. However, it is important to choose wisely, even in the value space.
- With a bear market taking hold, we anticipate a rocky road ahead for consumers. For this reason, we think it is important to dial down exposure to sectors that may be affected by a drop in consumer spending.
- While many investors follow the money, we choose to go where capital is starved. This includes energy, resources and agriculture.
Bear market: A financial market in which the prices of securities are falling. A generally accepted definition is a fall of 20% or more in an index over at least a two-month period.
Cyclicality: the concept that what goes around comes around; everything is cyclical. In this context, cyclicality refers to the idea that capital will flow into, and out of, all sectors, including popular areas such as tech.
Growth and value investing each have their own unique risks and potential for rewards, and may not be suitable for all investors. Growth stocks are subject to increased risk of loss and price volatility and may not realize their perceived growth potential. Value stocks can continue to be undervalued by the market for long periods of time and may not appreciate to the extent expected.
National Association of Securities Dealers Automated Quotation System (NASDAQ) is a nationwide computerized quotation system for over 5,500 over-the-counter stocks. The index is compiled of more than 4,800 stocks that are traded via this system.
Environmental, Social and Governance (ESG) or sustainable investing considers factors beyond traditional financial analysis. This may limit available investments and cause performance and exposures to differ from, and potentially be more concentrated in certain areas than, the broader market.