JPMorgan Chase & Co. strategists state that if the gains in growth stocks stall and the rotation to periodic stocks does not continue, the stock rally may be under pressure in the second half.
Strategists led by Mislav Matejka believe the defensive sectors offer a more attractive risk-return balance for the remainder of the year, although they continue to weigh growth against so-called cheaper stocks. The sectors they recommend include healthcare, basic consumer goods and services, and utilities.
“If growth stocks stagnate in absolute terms and there is no fundamental support for periodic rotation, then the overall market may be under pressure in the second half,” Matejka’s team noted in a note.
While strategists do not recommend participating in the recovery in period value stocks, they state that the return on growth and technology stocks may be limited. They point out that the tech sector is overbought by bond yields and historical price-earnings ratios.
The strong recovery in US equities this year has been driven by a narrow group of investors based on profit growth by big tech companies with bets on artificial intelligence. JPMorgan strategists state that the market is still “extremely concentrated” and that this is “typically unhealthy.”
Since the Beginning of the Year, Ascension Lost 15% in S&P, BIST Lost!
When we look at the rise of S&P since the beginning of the year, it is possible to see the rally in the US markets more clearly. As of the new year, the S&P 500 has gained 15.31 percent in value, while Borsa Istanbul is still about 5 percent below its peak, despite the sharp rise it experienced after the new government’s announcement of returning to “rational” economic ground.
Growth Stocks were the Favorite of the Last 1 Year
There are 2 types of investment perspectives that are generally common among investors. Investing in value investment and growth stocks. Value-oriented investing is on the side of Warren Buffett, one of the richest people in the world, while investing in growth stocks is on the side of famous investor Phil Fisher. While the Buffett-style value investing focuses on the stocks of companies that are priced below their intrinsic value and do not reflect their intrinsic value, the Fisher-style investment approach represents the understanding of investing in companies that can achieve great things in the future, grow rapidly and give importance to expenditures such as R&D.
In terms of investment, these two different perspectives have generally resulted in the favor of Warren Bufett’s value-oriented stocks, but it seems that the returns of the stocks, which are stated as “growth” stocks, have outweighed in the last 1 year.
While the relatively smaller growth shares in the portfolio of the Brown Capital Management Small (BCSIX) fund, one of the growth-oriented investment funds listed by Morningstar, have risen close to 100 percent in the last 1 year, they are an integral part of the famous billionaire and value investor Buffett’s portfolio. The shares of Coca-Cola, which is the new favorite, and Occidental Petroleum, which are the new apple of the eye, have followed a flat course in the last 1 year.
In this period, AppFolio, which makes up 5.5 percent of the total portfolio of the BCIX fund and offers software-as-a-service applications for vertical markets, increased by 88 percent in the last 1 year from $ 93 to $ 173 in the same period, while Warren’s value-oriented Coca-Cola On the other hand, it rose 1.60 percent from 61.15 to 61.67 dollars.
During the same period, Warren Buffett’s new favorite Occidental Petroleum showed a limited rise from $55.77 to $58.15, while it is a global sales company that develops CAE (Computer Aided Engineering) / multiphysics engineering simulation software for product design, testing and operation. Ansys, on the other hand, rose 42 percent.
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