Tilting towards value equities in 2021

WE maintain a bullish outlook for global equities in general for 2021. However, we are switching our bias from a preference for the so-called Quality and Growth stocks to an increasingly optimistic outlook for Value equities.

At a high level, Growth stocks are companies with a high expected earnings growth rate. Value stocks are companies that are cheap relative to the rest of the market. While valuations for all areas of the market look expensive relative to their own history, growth equities appear to have discounted a lot more good news and, therefore, there is scope for their Value counterparts to play catch up.

It might sound strange, but Growth stocks did extraordinarily well in 2020, despite the unprecedented recession. There are two main reasons for this.