Investors seeking refuge in two corners of the equity market touted for their resilience in the grip of sell-offs may be living on borrowed time.
Sure, low-volatility stocks are living up to their label of late, on track for the best quarter of outperformance since 2011. Meanwhile, a Russell Value index has beaten growth for four straight weeks, the longest streak in almost two years, as $2 trillion was wiped off the U.S. market.
But money managers playing defense are now in a quandary, as volatility and a long-in-the-tooth U.S. expansion vex tried and tested strategies.
Stocks that boast cheap valuations, and those with muted price swings are at the mercy from an aging business cycle saddled with a multitude of threats from interest-rate hikes to market crowding, warn investors.
“When you have higher rates for very good reason with an acceleration of GDP growth -- this is the best scenario to invest in value stocks,” said Cyrille Collet, Paris-based head of quantitative investing at CPR Asset Management, an Amundi SA unit that oversees 46 billion euros ($52 billion). “But now it’s more complicated because a lot of people believe the acceleration of GDP growth is behind us.”
Source: Bloomberg Finance L.P.
Chart: Used with permission from Bloomberg Finance L.P.
Original post: Safe Spaces in the Stock Market Are Looking Shaky Now
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