M&G Value Equities team - The Value Rally, nine months on

Summary: A note from the M&G Value Equities team which discusses the recent market rotation towards value stocks. The team also explains why they believe the outlook for value investing remains attractive.

• The value rally since September 2020 has been driven by a decrease in the valuation of growth stocks rather than an increase in that of value stocks, in our view, as well as by upgrades to earnings forecasts of the cheapest stocks. 
•  We believe the market environment is becoming more favourable for the value style: the decline in bond yields could be ending, the global economy is recovering and mega-cap growth stocks are likely to experience increased challenges.
• Even after the rotation into value, the valuation gap between cheap and expensive companies remains wide and we think there are many attractive opportunities among value stocks for selective investors.

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The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested.