Value Does Just Fine in Recessions

GMO

Ben Inker

Research

7 Pages

GMO examines whether value stocks are especially vulnerable in recessions or if history tells a different story. Using several valuation models and data since the late nineteen sixties, the paper finds value has typically outperformed in downturns. It also compares value traps and growth traps to show that disappointment is not unique to cheap stocks.

Date published: June 2023

Key Takeaways

Value in recessions: Historical US and global data show value often beats the market across recessions, except unusual events like Covid.
Deep value behavior: Cheapest segment of markets does not systematically lag in recessions and can benefit when low expectations are reset.
Traps perspective: Both value and growth suffer traps, but growth traps typically inflict larger losses when lofty expectations fail.
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