The time to invest in value stocks has arrived, as analysts suggest a shift away from growth stocks that have dominated the market in recent years. Growth stocks, known for their rapid earnings growth and high valuations, have seen a significant outperformance due to super-low interest rates and the impact of artificial intelligence.
However, experts are now recognizing the potential for value stocks, which trade below their intrinsic or book value, to make a comeback. Factors such as impending rate cuts by central banks and expectations of economic acceleration are driving this shift towards undervalued stocks with stable fundamentals.
Deutsche Bank has shown confidence in the equity markets for 2024, indicating a positive outlook for value stocks despite initial skepticism. Liberum strategist Joachim Klement also points towards a potential turnaround for value stocks, suggesting a focus on construction and precious metals miners to benefit from the emerging trend.
European equities are being favored over US counterparts by Deutsche Bank, citing an optimistic outlook on the European economy and undervalued earnings forecasts as key reasons. The focus on small caps, which offer higher long-term earnings growth at a discount, further supports the belief in the resurgence of value stocks in the current market landscape.
As value stocks begin to gain momentum, investors are advised to consider diversifying their portfolios to leverage the expected outperformance relative to growth stocks. With the market showing signs of change, now could be the opportune time to reconsider investment strategies and capitalize on the potential of undervalued assets in the coming period.
