We beat Bloomberg to the punch.
About a month ago, I revealed my big, bold prediction for the stock market in 2022. Go here for all the details, but here’s the bottom line: Value stocks will rise to the level of growth stocks this year.
A poll on our YouTube page found that 48% of you disagreed and believed that growth stocks would dominate the market again.
I expected that.
A few days ago, I read an article in Bloomberg that supports my prediction … weeks after I made my prediction.
In this episode of The Bull & The Bear, I share why this market shift matters and give you a way to play the potential rise in value stocks.
Value Stocks Start to Close the Gap
It’s no secret that growth stocks have kicked the tail of value stocks for years now.
When the Federal Reserve keeps interest rates low, profits from high-growth stocks are worth more, keeping investors piling money into these strong-earning equities.
However, in December, the Fed pointed to reducing its bond purchasing and hinted at future rate hikes this year.
Higher rates mean future profits from high-growth stocks are worth less. With the lowered expectation in growth and future cash flows, investors don’t get as much bang for their buck when interest rates rise.
And the market is taking notice.
Since the summer of 2021, growth stocks have outperformed value stocks, according to a comparison of the MSCI World Value Index and the MSCI World Growth Index.
But, if you zero in on the end of 2021, you can see that growth stocks have started to pare back, while value stocks continue to increase their returns.
I think this sets the table for my prediction to be closer to reality than you might expect. I share with you what other analysts said in this episode of The Bull & The Bear. I also reveal a way you can play this potential to take profits on value stocks.
The Bull & The Bear
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Matt Clark, CMSA®
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He is a certified Capital Markets & Securities Analyst with the Corporate Finance Institute and a contributor to Seeking Alpha. Prior to joining Money & Markets, he was a journalist and editor for 25 years, covering college sports, business and politics.