Despite the threat of rising inflation and a potentially more hawkish Fed stance, “some market strategists say the group could still see gains this year.” This according to a recent article in Barron’s.
“Market leadership has been shifting,” the article states, explaining that value stocks have pulled back from recent highs while growth stocks have started to rebound. Late last month, however, the dynamic flipped, with the “value ETF coming out ahead of the broader market and the growth ETF,” the article reports, adding, “That might be a signal it’s too soon to give up on value stocks.”
Keith Lerner, chief market strategist at Truist Advisory Services, recently wrote, “What we are currently seeing is an uncomfortable gut check for the value trade after it became overcrowded on a short-term basis and vulnerable to a setback given hefty gains over the past nine months. However, the factors behind our value tilt have not changed.”
The article reports that Lerner expects the U.S. economy to grow near 7% this year and more then 3.5% next year, which would continue to fuel earnings growth for the cyclical businesses that are represented in the value stock group. He also noted that the earnings momentum of growth stocks (particularly tech) relative to the broader market has been dipping since last May.
For now, the article concludes, “investors will likely see a choppier market in the second half of the year where value continues to lead and gain.”