One of the notable occurrences from the selloff in recent weeks has been the marked performance differential between growth stocks and value stocks. Since the start of October, managers with a greater bias to growth stocks are down up to 10%, while managers with a value style bias have held up comparatively well and are down up to 5%. Many of these value names (which have struggled in recent years) versus growth stocks, have benefited in recent weeks from their exposure to low P\/E ratio and high dividend yield investments. Energy stocks such as Borr Drilling have in turn been strengthened by the rise in oil price.<\/p>\n
Meanwhile the bastions of growth tech companies like Amazon and Netflix, have driven the majority of returns of the US equity index YTD but also account for a large percentage of the returns of the MSCI World Index. The issue with such narrow market leadership is that in the blink of an eye a whole years\u2019 returns can be swept away. Many of the FAANG stocks are currently 20% off their highs. Furthermore, as the risk-free rate rises in the US and UK many of the popular \u201cbond proxies\u201d (stable growth, moderate DY stocks) of the past ten years have begun to lose their shine. For the first time in this cycle, the yield on the 10Y US treasury is higher than the dividend yield on stocks such as Unilever and Nestl\u00e9.<\/p>\n
As investors we are tasked with creating an all-weather portfolio of funds that is robust enough to protect client capital on the downside whilst participating on the upside. One of the ways that we do this is by investing in funds that complement each other well. By buying funds that have a low holding commonality, a comparatively low correlation and differing investment styles, we are able to generate smoothed returns across the market cycle which ultimately help us achieve our stated aim of strong risk adjusted returns for our clients.<\/p>\n","protected":false},"excerpt":{"rendered":"
One of the notable occurrences from the selloff in recent weeks has been the marked performance differential between growth stocks and value stocks. Since the start of October, managers with a greater bias to growth stocks are down up to 10%, while managers with a value style bias have held up comparatively well and are… <\/p>\n