DoubleLine Capital examines the case for a potential revival in value investing after a prolonged period of growth dominance. The paper argues that extreme valuation spreads and rising inflation expectations could tilt the playing field, though timing remains uncertain. It suggests value may benefit if rates normalize, challenging the consensus that growth leadership is permanent.
Value Investing is Dead? No, Long Live Value!
DoubleLine
Emidio Checcone, Brian Ear
Research
21 Pages
Key Takeaways
Valuation Gap Extreme: The spread between growth and value reached nearly 100% at peaks, placing it in the top 1% of historical divergences.
Inflation Regime Shift: Value stocks have historically outperformed during periods when inflation exceeds 3%, signaling potential tailwinds if inflation persists.
Rate Sensitivity Divergence: A 100 basis point rise in rates has historically led to value outperforming growth by roughly 5–10% annually.
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