The outperformance of growth stocks over value stocks has reached record levels, as has the valuation gap. The environment for growth stocks has been ideal: interest rates have plummeted, and US technology companies have become increasingly dominant in the United States and abroad. However, we believe this ideal environment is unlikely to last. Inflation -- which has been dormant for years -- may rise as a result of stimulus measures. Historically, value has outperformed growth during inflationary periods. We expect that select quality value stocks that can manage through this difficult economic period could benefit as the US and the global economy rebound and inflation returns. Given the uncertainty regarding the timing of a reflation of the US economy and the potential for a corresponding increase in interest rates, we believe increasing exposure to both high-quality value stocks and growth stocks may be prudent, while reducing exposure to hyper-growth and deep-value stocks.
No systemic risk from SVB failure, but watch out for areas o...
