The shake-up suggests that the US$1.9-trillion spending bill passed by America’s Congress and signed into law by the president last week, combined with vaccine rollouts and the reopening of the world’s major economies, will kick off a markedly different phase in markets to the rally of the past year.
The strong run for banks highlights the shift in investors’ outlook prompted in part by the Biden administration’s plan to pump money into the world’s largest economy and into the pockets of many Americans. The president’s announcement last week that he would seek to bring a sense of normal back to America by July 4 bolstered this perspective.
MSCI’s global value index, which tracks companies that trade at low levels compared with measures of their fair value, has risen 8.7 per cent since the start of the year, and reached an all-time high last Thursday. This marks a switch from last year, when the index fell 3.6 per cent, widely trailing an MSCI barometer of rapidly growing companies that soared 33 per cent.Article content
“Last year, growth was scarce and growth stocks were doing well, and now growth is abundant and the most underpriced stocks are the ones that are doing well,” said Juha Seppala, director on the macro asset allocation strategy team at UBS Asset Management. “This year, that rotation is going to continue and value is going to outperform growth.”Photo by Arnd Wiegmann/Reuters files