Asset Allocation

U.S. Growth Outperformance Likely to Continue

February 13, 2020
U.S. value stocks lack a durable catalyst to outperform growth.

Key Points

  • Despite a record span of dominance by U.S. growth stocks, we believe U.S. value stocks lack a durable catalyst to outperform.
  • In our view, structural factors that have underpinned the U.S. growth rally are unlikely to fade in the near term.

Since the 2008–2009 global financial crisis, U.S. growth stocks have outpaced their value peers. Improving market sentiment and global economic outlook—helped, in part, by the Fed’s 2019 “midcycle adjustment” and easing U.S.‑China trade tensions—have prompted investors to ask if it is time to shift to a value overweight. We say, “not yet.”

Supportive factors for cyclical stocks within the value sector have not made a “round trip.” While the Fed has cut interest rates, additional reductions are not expected. Further, the “phase one” trade deal means a pause in escalation, not a reversal of tariffs. Therefore, we believe that the magnitude of value’s advance is likely limited.

Meanwhile, we see no signs that the structural tailwinds that have driven the U.S. growth rally are abating. Innovative growth companies are leveraging automation for efficiency and benefiting from rapid technology adoption globally. Disruption in retail, media, and enterprise technology continues to shift massive market share from entrenched players to innovators.

U.S. growth valuations may periodically seem extended, while investors question the durability of this growth cycle. However, we believe that solid fundamentals—including improvements in cash flow, revenues, earnings, and profit margins—continue to underpin the rally. In our view, until these structural tailwinds have faded, a meaningful shift back to U.S. value leadership is unlikely in the near term.

Fundamentals Have Supported Superior Performance by Growth Stocks

Additional Disclosures

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Important Information

This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action.

The views contained herein are those of the authors as of February 2020 and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.

This information is not intended to reflect a current or past recommendation, investment advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Investors will need to consider their own circumstances before making an investment decision.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy.

Past performance is not a reliable indicator of future performance. All investments are subject to market risk, including the possible loss of principal. All charts and tables are shown for illustrative purposes only.


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