Analysts debate growth vs value

Rising interest rates the big risk for growth stocks

Chart of the Day

There’s increased talk from equity analysts about whether now is the time to sell “growth” stocks, like tech firms. Those companies have been on a stellar run lately, with the S&P 500 growth index still up by 60% since the start of 2020 despite dropping back in recent days, but the big concern is that high earnings expectations are now fully discounted. Additionally, there are concerns that growth stocks could suffer by more than value stocks as the Fed starts to normalize policy, as those future revenues will be discounted at higher rates. The problem for investors is that the growth vs value debate is nothing new, and recent calls to sell growth stocks have been misjudged.

Macro

In the year to August, the US federal government ran a deficit of $2,835 billion, or 12.5% of GDP.

Australian house price inflation has surged, much like in many other economies.

India’s consumer price inflation dropped back in August and is now below the upper limit of the central bank’s 2% to 6% inflation range.

Markets

The VIX dropped back yesterday after the relatively large spike late last week, as the S&P 500 recorded its first gain in several sessions.

There’s been little change in the relative rankings of sectors lately in terms of their post-2020 performance, with energy still doing the worst.

There’s talk in the markets that we could be heading for higher oil prices, although for now they are still below their level from early July.

There’s no sign of a US supply response yet, with the rig count still very low.

Reduced demand in China continues to weigh on iron ore prices.

Concerns that Chinese real estate company Evergrande could soon go bust have not had much effect on the Chinese currency.

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