John Rogers, founder of Ariel Investments, the oldest mid-cap value fund in the U.S. with $15 billion in assets under management, said the U.S. is headed for a repeat of the “Roaring Twenties” a century ago, which will eventually encourage investors to sell off technology stocks in favor of more economically sensitive companies, according to foreign media reports. technology stocks in favor of more economically sensitive companies.
Rogers pointed out that since 2009, has been waiting for a vigorous economic recovery, this Time will be a sustainable recovery, the strength of the economic recovery will make people surprised, and the Federal Reserve’s extremely dovish monetary policy to bring challenges. He also believes that the frenzied buying of special purpose acquisition companies (SPACS) is a sign of a top in growth stocks, which is a signal that the market has a bubble. Based on the future profitability of stocks, rising U.S. bond rates have reduced the relative attractiveness of holding growth stocks.
He pointed out that the Federal Reserve is overly optimistic that it can keep Inflation under control and that rising interest rates in the U.S. bond market will reduce the value of future earnings of very popular growth stocks such as technology companies. In addition, speculative companies trading through initial public offerings (IPOs) or with SPACS will also be affected.
Indeed, proponents of value investing argue that expensive growth stock valuations coupled with a strong post-Epidemic economic recovery will lead to a significant shift between the two investment approaches. Value investing, which is based on identifying cheap companies whose shares are priced below their true value, is an investment approach long espoused by U.S. stock god Warren Buffett. rogers has focused on buying under-valued stocks throughout his nearly 40-year career.
After the dot-com bubble burst in 2000, there was a boom in value and cycle-sensitive stocks, but over the past decade, growth stocks led by U.S. tech giants have far outpaced value and cycle-sensitive stocks. When the 10-year U.S. bond yield rises, growth stocks look too expensive relative to value, and value stocks are poised for a very strong recovery with earnings performance benefiting.
The Russell 1000 Value Index outperformed the Growth Index by 6 percentage points in February, rising 5.8%, while the Growth Index fell 0.1% over the same period. The report quoted Bank of America analysts as saying that this was the biggest gain for the value index since March 2001. While rising interest rates have triggered this rotation, there are many other reasons why people prefer value to growth, including profit cycles, valuations and position adjustments, which could drive further investor preference for value-based. He is bullish on stocks where fees can be converted into profits, such as companies like KKR, Lazard and Janus Henderson.
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