But lingering uncertainty around inflation, Fed policy and global growth point toward further outperformance of value stocks, which is why we keep our preference for value over growth for the time being. Despite this, we see opportunities in select beaten-down growth stocks, i.e. companies linked to the automation and robotics theme, as well as energy security and carbon reduction, and the recovery in China.


Growth stocks have rallied as yields have fallen, and earnings have been better than expected.


  • The Nasdaq and FANG indexes have rallied around 20% since mid- June, while the MSCI ACWI growth index has rallied 11% over the same period, outperforming the MSCI value index's 8.5% rise.
  • While Meta’s earnings have disappointed, investors reacted positively to Google, Spotify, Microsoft, Amazon, and Apple results.

But we don’t think it’s time to buy growth just yet.


  • Many investors seem to think that the peak in the Fed’s hawkishness has passed, but recent comments from Fed officials undermine this dovish interpretation, while growing macro headwinds also add to uncertainty.
  • Following their recent rebound, global tech valuations are back on a forward price/earnings ratio (P/E) of 21x, well above their long-term average of 19x.

So we continue to favor value over growth for the time being, while we see select-opportunities in growth.


  • We believe value will continue to outperform but see select opportunities in growth such as beaten down-stocks with solid fundamentals.
  • Lingering supply chain issues will strengthen investment in local production, digitalization in manufacturing should lead to a new wave of automation, while the continued drive to carbon neutrality should support greentech investments.

Did you know ?


  • While the growth sector has seen a remarkable recovery in recent weeks, our analysis, stretching back to 1975, shows that when inflation has been above 3%, value stocks have outperformed growth stocks, regardless of the stage of the economic cycle.
  • Furthermore, growth stocks are still expensive relative to value stocks. The P/E valuation premium for the Russell 1000 Growth index compared with the Russell 1000 Value index is around double the long-term average of 35%.
  • And for unprofitable growth stocks, valuations are back to double-digit enterprise value/revenue multiples.

Investment View


Growth stocks have rebounded from their mid-June lows driven by lower US yields and better-than-feared 2Q results from mega-cap tech companies. But given uncertainty over inflation, Fed policy and global growth, we continue to believe that value stocks with a quality tilt will likely outperform in the near term, so we recommend a selective approach to growth stocks.


Main contributors - Sundeep Gantori, Stiehler


Content is a product of the Chief Investment Office (CIO).


Original report - Is it time to buy tech stocks?, 11 August 2022.