Recession fears loom over US value stocks

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Fears of a potential economic slowdown are clouding the outlook for value stocks, which have outperformed broader indexes this year in the face of surging inflation and rising interest rates.

Value stocks – commonly defined as those trading at a discount on metrics such as book value or price-to-earnings – have typically underperformed their growth counterparts over the past decade, when the S&P 500’s gains were driven by tech-focused giants such as Amazon.com Inc and Apple Inc. That dynamic shifted this year, as the Federal Reserve kicked off its first interest rate-hike cycle since 2018, disproportionately hurting growth stocks, which are more sensitive to higher interest rates. The Russell 1000 value index is down around 13% year-to-date, while the Russell 1000 growth index has fallen about 26%. —Agencies

 

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