“Never has a venial sin been punished this quickly and violently,” says Cliff Asness of AQR, the quantitative-investing giant that manages around $185bn. Back in November, AQR began increasing its exposure to value stocks on the basis that they then looked exceptionally cheap compared to the wider market – despite the firm’s long-standing principle that trying to time the market in this way amounts to an investing “sin” (because market timing is hard to get right and likely to backfire).
Thankfully, “we only sinned a little”, by increasing exposure a small amount. That turned out to be very fortunate, because the timing of AQR’s decision could not have been worse.
“In a decade quite bad for value investing, the start of 2020 is the absolute worst six-week period”: between 1 January and 13 February, the Russell 1000 Value index underperformed the Russell 1000 Growth index by 6.4%. (The Russell 1000 tracks the 1,000 largest US stocks – it’s similar to the S&P 500 but broader.) On a 30-year view, a span that includes events such as the 1998-2000 tech bubble and the 2008-2009 global financial crisis, value has only done worse 3% of the time. And among smaller companies, this has been the worst spell for value since at least 1963.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
“I have been a pooh-pooher … of some who compare this value pain to the tech bubble.” Value is not quite as cheap relative to the rest of the market as it was back then. However, the comparison is getting stronger, in terms of both the scale (“no more slow steady losses for value, now it’s very quick big ones”) and “the widespread embracing by many of all the reasons … why value is never going to work again”. Value investors need to stick to their process, even though that’s difficult when performance is as bad as this and others are finding reasons to throw in the towel. “We’ve seen this movie before a few times and we know how, but definitely not when, it ends.”
-
Families suffer £20,000 lost income growth – are you feeling the pinch?Average incomes for working age families have increased by just 7% in the past two decades, research suggests
-
How to achieve a secure retirement, as more retirees admit to struggling with debtTwenty-six percent of retirees now have unsecured debt – a sharp rise compared to two years ago – with many underestimating how much a typical retirement costs
-
Best-performing stocks in the S&P 500We take a look at the best-performing stocks in the US equity market. Are there opportunities outside of Big Tech?
-
What is Vix – the fear index?What is Vix? We explain how the fear index could guide your investment decisions.
-
The case for dividend growth stocksMany investors focus on yield alone when looking for income, that’s a mistake says Rupert Hargreaves. It’s the potential for dividend growth that really matters.
-
Halifax: House price slump continues as prices slide for the sixth consecutive monthUK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
-
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
-
Pension savers turn to gold investmentsInvestors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
-
Gilts look attractive, but trusts have more income growth potentialYields on gilts have reached levels not seen for 16 years, but with real yields still negative, investors should look to trusts instead.
-
Where to find the best returns from student accommodationStudent accommodation can be a lucrative investment if you know where to look.
