Rebound in growth stocks has 'somewhat further to go', JP Morgan says
It was too soon to rotate back into 'value' stocks from 'growth', strategists at JP Morgan said.
In a research note sent to clients, strategist Mislav Matejka described the bounce in so-called growth stocks as "tactical", but believed it likely had "somewhat further to go, perhaps even until year-end."
They key to his call was the direction of long-term Treasury yields and with activity momentum expected to trough sometime in the last quarter of 2022, growth stocks might be set to broadly stall until then.
However, a reversal in investment styles need not mean renewed weakness in the market overall, he said.
Indeed, historically, value factor and market direction were positively correlated.
"In H1, the Growth-Policy tradeoff was worsening, with stronger USD, and the Tech sector started this year very overbought, so there were clear shades of 2001 in the setup.
"This backdrop is likely to change from Q4. As activity momentum potentially troughs, Value could lead again, in a continued up market."