Monthly Style Summary to End March 2012

Sunday 1st April, 2012

While the US and Japanese equity markets gained, most other market regions experienced volatile and marginally negative returns during March.  Against this mixed background, there was, however, a generally consistent pattern of Style Returns. Curiously, high Beta stocks underperformed, even in the rising markets; but, more strikingly, in all but the UK, Value stocks are again underperforming while a wide range of Growth characteristics are outperforming.

While the 3 Month Style Map still shows roughly even returns from the key Value and Growth factors, with Asia Pacific and the Emerging Markets offering apparently stronger returns to Value, the 1 month data show the extent of the Value reversal. Leaving aside the UK, where Budget issues seem to be affecting Style rewards, virtually all Value factors, including Dividend Yield, are clearly underperforming a wide variety of Growth factors.

In valuation terms, even though Growth stocks are relatively expensive against markets’ overall valuations, against their historic ratings, both Large Growth and Small Growth stocks are relatively attractive.  Since it doesn’t appear that Value will be much supported by an imminent economic rebound and profits surge, it is very understandable that investors are attracted to companies with strong, and not particularly expensive, Growth attributes.