A market at extremes

November 2023

It’s hard to ignore how lopsided markets have become, favouring growth (especially US & tech) over everything else. As an example, look at the red dotted line in the graph below, the difference between value stocks looking inexpensive versus their history (the blue line) and growth stocks looking expensive versus theirs (the grey line).

The last time this ratio peaked, during the dot.com boom and at a level significantly below where we sit today, value outperformed growth for 7 years straight (2000 to 2006)…

At any time, investors should ensure they have at least a few eggs in the “not growth” basket. Perhaps given the current valuation discrepancy, they should have more than a few. 

* Data from Bloomberg showing Price to Earnings ratio (excluding negative values) of MSCI World Growth Index and MSCI World Value Index