Graph of the week

Graph of the week

13-09-2019 | インサイト

Is the ‘great rotation’ almost upon us?

  • Jeroen Blokland
    Portfolio Manager

Stock markets have been fairly quiet in recent days, with steady increases across the board. But take a closer look and you will see that there has been a spectacular rotation. As the graph shows, value stocks – which have lagged growth stocks for almost 15 years – seem to be catching up. Is this a signal that the ‘great rotation’ is on its way?


Value outperforms growth

Despite having underperformed in the past decade and a half, value stocks have outperformed growth stocks since 1975. A key explanation for this long-term trend is that investors tend to be overly negative about dull, slow-growing value stocks – typical characteristics of value stocks – and are generally much more enthusiastic about growth stocks, which seem to offer limitless potential.

This extrapolation of future expectations has to be adjusted at some stage, at which point value will once more outperform growth. But the fact that this has not happened in 15 years suggests that more factors are now at play, with the increasing scarcity of growth being one example: global growth had slowed in the run-up to the financial crisis and waned further once the crisis had erupted.

This could mean that investors are willing to pay more for companies that show high growth. In addition, secular trends are almost certainly playing a role. The past two decades have been characterized by enormous technological breakthroughs. From advanced production processes to a shift towards online consumption, and the emergence of social networks such as Facebook: they are all driven by technology.

And technology companies are, as a rule, growth companies. On the other hand, one of the more traditional value sectors – banking – is struggling. The aftermath of the financial crisis, increased regulation and new competition in the form of fast-growing fintech companies have put this sector under considerable pressure.

Will the rotation continue?

It is difficult to say whether the rotation will continue. Investors certainly will continue their habit of extrapolating expectations. This could justify a tilt towards value stocks. What is more, value stocks are currently cheap from an historical perspective. In other words, they are inexpensive relative even to their own long-term valuation.

And when economic growth picks up, partly as a result of new central bank stimulus, growth will become slightly less scarce. But this doesn’t mean it there’s no case for owning growth stocks. Companies that specifically benefit from secular trends such as technological change, an ageing population, and the environment and society, could definitely outperform the market. 

The key, of course, is in selecting those companies that can meet these expectations.


当資料は情報提供を目的として、Robeco Institutional Asset Management B.V.が作成した英文資料、もしくはその英文資料をロベコ・ジャパン株式会社が翻訳したものです。資料中の個別の金融商品の売買の勧誘や推奨等を目的とするものではありません。記載された情報は十分信頼できるものであると考えておりますが、その正確性、完全性を保証するものではありません。意見や見通しはあくまで作成日における弊社の判断に基づくものであり、今後予告なしに変更されることがあります。運用状況、市場動向、意見等は、過去の一時点あるいは過去の一定期間についてのものであり、過去の実績は将来の運用成果を保証または示唆するものではありません。また、記載された投資方針・戦略等は全ての投資家の皆様に適合するとは限りません。当資料は法律、税務、会計面での助言の提供を意図するものではありません。




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