It has been a good year for value investors. The Russell 1000 value index RLV, -1.57% has gained 17%, while the Russell 1000 growth index RLG, -1.41% has increased a mere 3%. Still, that doesn’t really move the needle on performance of the last 10 years, in which growth stocks, on the same measure, have jumped 311%, compared with a 134% gain for value.
Inker took to the housing market to show how supply can be a predictor of future price busts. House prices, heading into the 2008 global financial crisis, only had a 4% correlation with the subsequent decline. Price-to-income valuations did a better job, with a 51% correlation, but the best predictor was the increase in housing supply, with a correlation of 69%.
Inker says the easy protection isn’t to own the speculative end of growth. “It is not a coincidence that value today is close to as cheap as it has ever been relative to the market, but it is convenient nevertheless. You can protect your equity portfolios by choosing to bias them toward value and away from the most expensive end of growth,” he says.Minutes of the most recent Federal Reserve interest-rate setting meeting will be released at 2 p.m.
The European Central Bank warned that the removal of COVID-19 pandemic support by governments could lead to rising insolvencies in the euro area.
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