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11 January 2021 / ASSET ALLOCATION VIEWPOINT

A Broader Tilt to Value

For the first time in over 10 years, we recently tilted our multi‑asset portfolios to an overweight position in value stocks relative to growth stocks.

Several years of underperformance by value stocks has led to a large spread in valuations between value and growth stocks, exposing attractive opportunities with meaningful upside potential. As we look forward to a post‑pandemic world, we believe that 2021 could be a period of significant global economic acceleration, an environment that typically favors value stocks.

Our tilt toward value includes regions outside the U.S., especially Japan and emerging markets. In Japan, equity markets are comparatively less expensive and, therefore, a good place to find potential value. Given Japan’s export‑oriented economy, Japanese equities are also more likely to benefit from increased global economic activity than from the nation’s domestic economy.

As outlined in the chart below, the MSCI Emerging Markets Index is dominated by technology‑heavy Asian stocks. However, other emerging markets regions—such as Latin America, Eastern Europe, Africa, and the Middle East—have greater exposure to value‑oriented cyclical sectors, which include financials, industrials and business services, energy, and materials. We believe that investors can better navigate and capture potential upside within this asset class through active portfolio management.

We think that 2021 offers the potential of strong economic acceleration, which could benefit portfolios exposed to value stocks. In our view, investors should consider broadening their search for value to regions outside the U.S. by incorporating actively managed strategies with strong stock selection to help discern and identify opportunities.

The Case for Value Stocks

Broadening the search for value

The Case for Value Stocks

Past performance is not a reliable indicator of future performance.

Source: T. Rowe Price analysis using data from FactSet Research Systems Inc. All rights reserved. Russell and MSCI, see Additional Disclosures.

1 “Technology+” includes the information technology sector as well as the internet retail and interactive media industries, which are part of the consumer discretionary and communications sectors, respectively.

 

IMPORTANT INFORMATION

This material is being furnished for general informational purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, and 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 noted on the material 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.

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© 2021 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.

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