In recent years, Wall Street generally focus on technology stocks and other high-growth sectors, so that the United States value stocks over the past 10 years as if in a “sleep” state. However, the well-known mutual fund company Pilot Group (Vanguard Group) newly published research, value stocks will soon wake up.
Foreign media reports, its asset management scale reached 6.2 trillion U.S. dollars of the Pilot Group in the 2021 outlook report, said the value stocks sleep period is nearing the end, but no specific time when to wake up.
Pilot’s latest view differs from its past, according to the company’s previous model, which pointed out that investors have been right to avoid value stocks over the past few years.
In its latest report, Pilot pointed out that “our research shows that the value premium (value premium) does exist, while growth stocks have performed more prominently in recent years, partly due to inflation going downhill for a long time and the failure of surplus growth to accelerate significantly over the past decade.”
The company noted that the low inflation rate will fuel the growth stock rally, because usually investing in this type of stock is seen as a “long shot,” focusing on longer-term future stock returns; in contrast, value stocks payout to shareholders in the short term is a higher proportion of surplus.
The Pilot Group expects “moderate inflation” to come soon, with U.S. Treasury yields rising toward 2%, but does not believe inflation will get out of hand. However, Pilot’s research found that value stocks are likely to outperform even in a low-inflation environment, mainly when surplus growth is generally accelerating across all sectors.
In addition, Pilot cautioned investors that the future performance of value stocks relative to growth stocks may be more like investors “choosing the lesser of two evils,” rather than a “full valuation rebound” in value stocks.
(Value stocks are expected to) outperform, and the main driver will be shrinking growth stock valuations, rather than value stock valuations rising back to levels seen decades ago,” Pilot said.
Looking ahead to the next decade, Pilot predicts that value stocks could rise by an average of 1.1% per year, while growth stocks will fall by an average of 2.6% per year.
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