Value Stocks Are in Position to Swamp Growth: Markets Live 2020
Comment of the Day

December 11 2019

Commentary by Eoin Treacy

Value Stocks Are in Position to Swamp Growth: Markets Live 2020

This article by Andrew Cinko for Bloomberg may be of interest to subscribers. Here is a section:

* If you’re upbeat about value companies, which are cyclical in nature, then you’re probably optimistic about the global economy. The good news is central bankers are doing everything they can to help the economy get back on track

* Fidelity’s sector strategist Denise Chisholm favors cyclical stocks now that the Fed and ECB are cutting rates at the same time. “That has happened only about 10% of the time since the ECB’s inception in 1998, and when it has, the U.S. market has surged in the subsequent 12 months. Cyclical stocks have fared especially well under these conditions, outperforming the market 71% of the time.”

* Even a limited resolution to the U.S.-China trade conflict should help a global economic revival by reducing uncertainty. That should release animal spirits by boosting new orders for
machinery, industrial supplies and energy. All that would make the case for value stronger than it’s been in years

Eoin Treacy's view

Sometimes there is a difference between cheap stocks and value stocks. For over a decade a torrent of liquidity hitting the market has rewarded risk taking and favoured growth at any cost. By comparison the slow and steady business models pursued by many classic value companies has appeared staid. The additional complication of technological obsolescence has resulted in companies with low P/Es and high dividends languishing because investors fear for their survival.

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