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T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. T. Rowe Price has been independently verified for the twenty four-year period ended June 30, 2020, by KPMG LLP. The verification report is available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. Verification does not provide assurance on the accuracy of any specific performance report.

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Asset Allocation Insights

Growth Versus Value: A Balanced View

Timothy C. Murray, Capital Markets Strategist

Key Insights

  • Although the performance of growth and value stocks has been widely bifurcated, we maintain a balanced view.
  • Trends driving growth outperformance may endure long term, while value stocks could offer more upside potential near term should economic activity normalize.

As summer draws to an end, stock performance has been widely bifurcated on a growth-versus-value basis (see performance chart below). Given the large divergence, value seems to offer more near‑term upside potential than growth— particularly if the development of a coronavirus vaccine normalizes economic activity.

Although value stocks could narrow the performance gap considerably, we remain cautious. In our view, the long‑term trends driving the outperformance of growth stocks relative to value will endure in a post‑pandemic world and may strengthen further.

Evaluating Growth and Value Stocks
Stock performance has been bifurcated, with secular trends driving growth outperformance

Past performance is not a reliable indicator of future performance.
Sources: Standard & Poor’s (See Additional Disclosure) and U.S. Census Bureau/Haver Analytics. T. Rowe Price analysis using data from FactSet Research Systems Inc. All rights reserved.

One notable trend is the shift from brick-and-mortar retail to online. We believe the magnitude and long‑term implications of this shift may be underappreciated, and we do not see a catalyst for a sustained reversal. Between 2009 and 2019, the share of online commerce as a percentage of all retail sales increased from 6% to 11%. By April 2020, that percentage leapt to 18%, exceeding the total increase experienced over the previous decade.

Although the trend has reversed somewhat with the easing of lockdown measures, the move toward e-commerce—which was already in progress—will likely continue. Furthermore, while the power of this trend is already largely reflected in the market, online penetration remains relatively low, with significant room for increased adoption. Similarly, the ongoing shifts in media consumption and to cloud software are also likely to persist.

Given these trends and the expectation that the financials sector—a meaningful segment of value stocks—will be burdened by low interest rates for a while, our outlook for growth and value is balanced, despite value’s large underperformance year‑to‑date.


Additional Disclosure

Copyright © 2020, S&P Global Market Intelligence (and its affiliates, as applicable). Reproduction of any information, data or material, including ratings (“Content”) in any form is prohibited except with the prior written permission of the relevant party. Such party, its affiliates and suppliers (“Content Providers”) do not guarantee the accuracy, adequacy, completeness, timeliness or availability of any Content and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such Content. In no event shall Content Providers be liable for any damages, costs, expenses, legal fees, or losses (including lost income or lost profit and opportunity costs) in connection with any use of the Content. A reference to a particular investment or security, a rating or any observation concerning an investment that is part of the Content is not a recommendation to buy, sell or hold such investment or security, does not address the suitability of an investment or security and should not be relied on as investment advice. Credit ratings are statements of opinions and are not statements of fact.


Important Information

This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, nor is it intended to serve as the primary basis for an investment decision. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources’ accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date written and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request. It is not intended for distribution to retail investors in any jurisdiction.

Canada—Issued in Canada by T. Rowe Price (Canada), Inc. T. Rowe Price (Canada), Inc.’s investment management services are only available to Accredited Investors as defined under National Instrument 45‑106. T. Rowe Price (Canada), Inc. enters into written delegation agreements with affiliates to provide investment management services.

Morningstar Awards 2020©. Morningstar, Inc. All Rights Reserved. Awarded to T. Rowe Price for 2020 U.S. Morningstar Exemplary Stewardship and to Jerome Clark for 2020 U.S. Morningstar Outstanding Portfolio Manager, U.S.A.

© 2020 T. Rowe Price. All rights reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, and the bighorn sheep design are, collectively and/or apart, trademarks or registered trademarks of T. Rowe Price Group, Inc.

202009‑1319225