Growth and value cycles tend to persist for long periods of time, and the growth style of equity investing has outperformed the value style since the 2008 global financial crisis—its longest outperformance streak on record.
Relative valuations, sector composition, and macroeconomic factors such as interest rates, inflation, and growth historically have been the primary drivers of relative performance for the two styles.
Recent market developments such as valuation convergence, higher short-term interest rates in the U.S., and deregulation of the financials sector could cause an inflection point in the growth/value cycle.
Investors potentially can prepare for this outcome by holding portfolios that not only strike a balance between value and growth but are also actively managed to adapt to new regimes.
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