Making the distinction between these two factors has never been as black and white as equity strategists might have you believe.
However, from a corporate level, with Q3 earnings season now finished, the shift has been somewhat cemented with consumer staples mostly disappointing expectations, while banks have largely delivered positive results.
According to Societe Generale’s latest Global Equity Compass, the consensus is expecting this trend to continue in 2017, with “positive earnings per share revisions for several discretionary sectors, along with healthcare and banks”.
The analysts expect the banking sector, already boosted by Trump’s victory, to deliver 18% earnings per share growth in 2017, a significant improvement over the -9% estimate for this year.
Taking a sector perspective is one way of distinguishing the trend, though can we really be sure that the commodities rally in the first half of the year was part of a wider value resurgence and not just supply/demand metrics specific to the asset class?
Another approach would be to look at specific named growth and value indices, most notable those offered by MSCI.
Over three years, the MSCI World Growth delivered 5.4% (to end October), compared to 2.8% from the MSCI World Value index. Over 12 months, the trend has reversed somewhat with 2.2% from the Value index versus a flat performance from the Growth benchmark.
