A stand-out feature of global equity markets in the past few months has been a marked rotation away from expensive ‘quality’ stocks into cheaper ‘value’ stocks. As the chart below shows, quality stocks strongly outperformed up to the middle of 2016. However, by November, value stocks had caught up and have since surged ahead strongly. A key driver of the rotation was that quality stocks had become expensive and value stocks had become cheap by historical standards, setting the scene for mean reversion. In a low interest rate environment, the attraction of reliable income streams is magnified. This has meant heightened interest in ‘bond proxies’ – high-quality equities with low earnings volatility and solid dividend payout track records. In this presentation, we explore what’s driving the rotation, whether or not is will continue, and the investment implications. Access the report here: (VIEW LINK)
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