Investment
Institute
Macroeconomic Research
The real story behind the value/growth rotation
Key Points
- The nature of rising interest rates is crucial in terms of understanding the potential impact on equities; real rates can be quite adverse for the asset class
- While one should pay attention to the sector composition of equity factors, currently it seems that rising interest rates explain factor rotation adequately
- Value tends to outperform growth in an environment of rising and high real rates
- The relationship between real rates and the rotation from growth to value stocks is structurally strong but cyclically weak
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