The global investment environment has fundamentally changed. Although it is nearly impossible to predict when and to what extent growth and value performance trends will reverse themselves, historically they have. Rather than try to predict future trends, investors should consider remaining diversified over the long term.

Value has Outperformed Recently

  • Over the past year, value stocks have outperformed their growth counterparts, ignited by factors including the war in Ukraine, inflation, and tightening central bank policy.
  • On a trailing 1-year basis,1 value has outperformed growth by nearly 12%, exhibiting roughly 1/3 of the drawdown.

Growth of $10,000 Since 2021
(6/30/21-6/30/22)

Source: FactSet. As of June 30, 2022. Past performance does not guarantee future results.

  • Given that equity style shifts tend to extend for multiple years, investors may consider re-evaluating their asset allocation to capture the potential cycle of continued value outperformance.

Russell 1000®Growth vs. Russell 1000®
Difference in Rolling 5-Yr Annualized Returns

Source: FactSet. As of June 30, 2022. Growth represented by the Russell 1000® Growth Index and Value represented by the Russell 1000® Value Index. Past performance does not guarantee future results. Past performance does not guarantee future results.

Value is Gaining Momentum

  • Although long term trends still slightly favor growth, value has begun to close the gap and has outperformed Growth globally over the past year.
  • Returns for value stocks have been led by significant gains in the energy sector, while returns for growth stocks have been overwhelmingly driven by underperformance in the Technology, Communications, and Consumer Discretionary sectors.

Style Return Differential Driven by extreme Sector Level Dispersion
S&P 500 Sector Performance

Source: FactSet. As of June 30, 2022. Past performance does not guarantee future results.

Value outperforming Growth Globally over the Past Year
Across all markets, Value has closed its gap with Growth that was extended during and after the bear market of 2020.

Why Value? Relative Valuations Look Attractive

  • Investors may need to reassess portfolio diversification and rebalancing after the conclusion of an extended cycle of growth outperformance.
  • The relative valuation of value compared to growth has not been as attractive since the end of the Dot-Com bubble in 2002, which precipitated along stretch of value outperformance.
  • The last time growth valuations were stretched to these levels was September 2003 and value stocks more than doubled the total return of growth stocks over the 5 years that followed.

Value Stocks May Be Attractive
Russell 1000 Growth and Value Forward Looking Price to Earnings Ratios (1998-2022)

Source: FactSet. As of June 30, 2022. Past performance does not guarantee future results.

  • Growth outperformance may test the resolve investors have to remain diversified. Although it is nearly impossible to predict when and to what extent these performance and valuation trends will reverse themselves, historically they have.
  • Rather than trying to predict future trends, investor should consider remaining diversified over the long term.

Past performance is not a guarantee of future results.

Diversification does not ensure a profit or protect against a loss.

Forward price/earnings (or P/E) ratio is the ratio of the company’s closing stock price to its estimated 12-month earnings per share.

This does not constitute investment advice or an investment recommendation.

Growth stocks may be more sensitive to market movements because their prices tend to reflect future investor expectations rather than just current profits. Growth stocks may underperform value stocks during given periods.

Value stocks may perform differently from the market as a whole and may be undervalued by the market for a long period of time.

Market prices of investments held by the Fund may fall rapidly or unpredictably due to a variety of economic or political factors, market conditions, disasters or public health issues, or in response to events that affect particular industries or companies.

The Russell 1000® Growth Index measures the performance of those Russell 1000 companies with higher price/book ratios and higher forecasted growth values. The stocks are also members of the Russell 3000® Growth Index.

The Russell 1000® Value Index measures the performance of those Russell 1000 companies with lower price/book ratios and lower forecasted growth values. The stocks are also members of the Russell 3000® Value Index.

The indices are unmanaged, are not available for direct investment and do not incur expenses.

AMG Funds LLC is a subsidiary and U.S. distribution arm of Affiliated Managers Group, Inc. (NYSE: AMG). 

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