[GRTV] Rising interest rates drive investors into value stocks
Spurned for years by investors intent on ploughing their funds into growth stocks, value-based investing is making a comeback.
Greg Smith, head of retail at Devon Fund, says growth stocks, which tend to do better when interest rates are low and expected to remain low, have had a good run since the GFC but this environment is changing as interest rates rise across the globe.
Not only are central banks lifting rates but bond yields in the US have risen one percentage point, from 1.6% to 2.7%, since the beginning of this year “and people are starting to focus on the fact that rates are going only one way – north”, Smith says.
Growth stocks flourished during the pandemic, but investors are now turning their attention to value stocks – those that trade at a significant discount to their intrinsic value. Another area where this can be seen is a move away from tech stocks, with the Nasdaq composite down 14% year-on-year.
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