Value investors look to outperform the broad equity market by purchasing stocks that are cheap relative to measures of fundamental value. This is an approach to investing that is well supported by academic research and has delivered impressive results on a long-term basis. However, the results for value investing have been unimpressive for most of the past decade, leading many to ask the question “Is Value Dead?” As we detail below, our take is that value investing recently has been hampered by a combination of falling interest rates and inflation expectations, a willingness of investors to pay more for growth than they used to, and the impact of a severe recession in 2020. Our outlook for value over the next year is constructive given how cheap value stocks have become and expectations for an economic recovery. The longer-term outlook is, in our view, much harder to handicap.
1045632-00001-00 Ed. 02/2021