Growth or value…which investment style will prevail?

Global growth is vulnerable to record inflation, the transition to QT, possible stagflation, a resurgence of COVID and war in Europe. In an atypical recovery, Nidhi Mahurkar and Rhynhardt Roodt of 4Factor discuss the outlook for equity styles.

12 Apr 2022

4 minutes

Rhynhardt Roodt

A shock new market regime of record inflation, central bank activity, stagflation and the resurgence of COVID in China is creating a high degree of investor uncertainty.

Value has proved the best performing investment style since the beginning of 2021, but decelerating economic growth and inflationary pressures are clouding its outlook.

Dominant over the past decade, the growth style is being challenged by rising interest rates.

A worsening crisis in Europe could see the quality style outperform.

While some investors might be fixated on which equity style will be next to prevail, we believe that investors would benefit from a more agnostic approach that utilises bottom-up stock selection, rather than allocating to particular characteristics, sectors or regions.

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Specific risks

Equity investment: The value of equities (e.g. shares) and equity-related investments may vary according to company profits and future prospects as well as more general market factors. In the event of a company default (e.g. insolvency), the owners of their equity rank last in terms of any financial payment from that company. Emerging market (inc. China): These markets carry a higher risk of financial loss than more developed markets as they may have less developed legal, political, economic or other systems.

General risks

All investments carry the risk of capital loss. The value of investments, and any income generated from them, can fall as well as rise and will be affected by changes in interest rates, currency fluctuations, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which the investment strategy invests. If any currency differs from the investor’s home currency, returns may increase or decrease as a result of currency fluctuations. Past performance is not a reliable indicator of future results. Environmental, social or governance related risk events or factors, if they occur, could cause a negative impact on the value of investments.

Authored by

Rhynhardt Roodt
Portfolio Manager

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