Investors may be overexposed to growth stocks over value stocks according to Bank of America’s Research Investment Committee data on ETF inflows dating back to 2019. Yahoo Finance’s Julie Hyman joins Asking for a Trend to differentiate between value and growth investments and how investors seem to be prioritizing the two.
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This post was written by Luke Carberry Mogan.
Video Transcript
Value appears to be sitting in the shadows of growth.
But how much has it been overlooked?
Joining me here with the details of your finances, your own Julie, very poetic there sitting in the shadows of growth.
This chart coming to us courtesy of Bank of America, which sort of looked at the value growth of dichotomy in a recent note and pointed out that if you look at ETF flows here in the United States that investors really have preferred growth over the past few years.
So this is a chart of the flows into those types of funds.
There’s a $75 billion gap between the two.
So since 2019, we have seen $173 billion go into growth oriented ETF S only $96 billion into value oriented ETF S here and Bank of America said that value is overlooked and under own.
Now, just quickly when we’re talking about growth versus value, what what are we talking about?
Growth sort of inherent in the name, right?
It tends to be the growth sectors, the ones that see more revenue growth especially, but also profitability.
Growth value tends to be some of the cyclical sectors of energy and financials tend to fall into those categories that tend to be viewed as value or sort of lower pe names, so to speak Josh, so Julian, so what why does Bank of America think value is due for a comeback?
Well, part of it is reversion to the mean is that over the longer term, much longer term value had tended to outperform growth over the long term really until the past decade or so.
When growth started gaining more consistent steam the Bank of America folks are also looking at what they say are their forecasts for inflation, industrial production and oil production and that those various factors should be positive for these more value oriented names.
But of course, this not consensus here, it’s a little bit out of consensus.
I mean, for example, we talked to, talked to Omar Aguilar of Schwab Asset Management at 3 p.m. and he said he doesn’t even really like those value growth labels.
He’s preferring to look at what he calls high quality that have consistent cash flow and growing dividends over time.
So you, you have to wonder if the growth versus value sort of and or even just in that way has sort of falling out of it has been falling out of fashion.
All right, Julie, get you out of here on this to you and me tomorrow and all the investors viewers were all focused on the FED what do you expect from Jay Powell when he’s on the mic?
Well, you know, listen, he’s gonna say probably what he has been saying, right?
Continue to emphasize that we need more good data.
Obviously, that’s gonna be very important in the context of what we’re gonna hear tomorrow morning with the consumer price index.
Will consumer price is the increase that we’ve been seeing continue to moderate for some extent.
A lot is riding on that.
Then what is the dot Plot gonna show say, what does the fed expect in terms of how many interest rate cuts we’re going to see this year, how much are they going to be pushing back the expectations for when they’re going to begin rate cuts?
So a lot will be on the table.
It will be Josh Lipton, anything but boring.
That is so true, Julie.
Thank you very much.
Appreciate it.
