Make value great again!

Chart of the week

Since December 2021, cyclical stocks, known as value stocks (banks, energy, and automobiles in particular), have clearly outperformed growth stocks (mainly technology and luxury goods).

OUR ANALYSIS

Since the end of 2021, the better performance of the value segment is mainly explained by the context of rising interest rates in fixed income markets. This phenomenon, linked to the return of inflation and the prospect of monetary tightening by the Fed, penalizes growth stocks, which benefited from the low interest rate environment in 2020 and 2021.

For the banking sector, which relies on credit margins and investment, the rise in interest rates is good news as it reduces the problem of low yields. Other factors directly benefit cyclical stocks. The prevalence of the less dangerous Omicron variant makes it possible to expect a return to normalcy favorable to the “traditional” sectors. The rise in oil and gas prices is benefiting the energy sector and the gradual resolution of shortages is opening up better prospects for the automotive sector, which was hurt last year by a lack of electronic parts.

It is worth noting that the relative performance of the value segment compared to growth stocks still has room for improvement, given the backlog accumulated over the past 15 years.

See also: https://lazardfreresgestion-tribune.fr/en/united-states-fastest-drop-in-unemployment-rate-since-1950/

 

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The following opinion was written on January 28, 2022 and is susceptible of changing.

*Sources : Bloomberg, and calculation from Lazard Frères Gestion

As of : January 28, 2022

This document is not pre-contractual or contractual in nature. It is provided for information purposes. The analyses and descriptions contained in this document shall not be interpreted as being advice or recommendations on the part of Lazard Frères Gestion SAS. This document does not constitute an offer or invitation to purchase or sell, nor an encouragement to invest. This document is the intellectual property of Lazard Frères Gestion SAS. LAZARD FRERES GESTION – a simplified joint stock company with share capital of €14,487,500 – Paris Trade and Companies Registry No. 352 213 599. 25, RUE DE COURCELLES – 75008 PARIS, FRANCE


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