Value’s rebound is still minor relative to its underperformance since the global financial crisis. Its price-to-book gap with growth remains more than twice the 25- or 10-year average and not far from the peak that preceded the burst of the dot-com bubble.
While steadfast fans see that valuation gap as a sign the recovery has further to go, to the skeptics that have triumphed for the past decade it’s a reminder that the factor’s woes run deep.
Regardless, those who held onto the strategy through the Covid agony are getting some relief. Take Cliff Asness, the AQR Capital Management co-founder who argued in favor of boosting value bets in late 2019.
He wrote in a paper released last week that it’s misleading to assume value has been dead in recent years based on poor historical returns. Since weak performance has been partly driven by the factor getting cheaper, there’s reason to keep the faith, the quant manager wrote.
That’s as long as one doesn’t think valuations will keep falling, of course.
After its remarkable rebound, the investing style was taking a backseat in Tuesday trading. Instead, battered U.S. tech stocks looked poised for a bounce after losing $1.5 trillion in less than a month.
But with capital spending recovering, the rally in cyclical shares has room to run even as the rotation takes a breather, according to Evercore.
“The macro backdrop still favors value and price volatility, but the pace of returns should slow,” the team lead by DeBusschere wrote.
—With assistance from Dani Burger and Claire Ballentine.
This article was provided by Bloomberg News.