{"id":22243,"date":"2025-09-17T17:46:16","date_gmt":"2025-09-17T17:46:16","guid":{"rendered":"https:\/\/www.newsbeep.com\/il\/22243\/"},"modified":"2025-09-17T17:46:16","modified_gmt":"2025-09-17T17:46:16","slug":"value-is-beating-growth-everywhere-apart-from-the-us","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/il\/22243\/","title":{"rendered":"Value is beating growth everywhere… apart from the US"},"content":{"rendered":"

Investors could be missing out if they assume the growth story in the US is being replicated around the world.<\/p>\n

Investors passively tracking the global stock market could be misled into thinking growth is the winning investment style globally. But according to Duncan Lamont, head of strategic research at Schroders, the opposite is in fact true, with value outperforming everywhere bar the US. \u00a0<\/p>\n

When assessing the performance of global markets, the results are often skewed by growth-strong US-based companies (like the Magnificent Seven), which make up 75% of the weighting by market capitalisation.<\/p>\n

However, when looking at an index designed to represent global developed markets while excluding North America \u2013 EAFE (Europe, Australasia and the Far East) \u2013 value returned 20% in dollar terms in the 12 months ending 31 August 2025.<\/p>\n

Value stocks outperformed the wider EAFE market by 6% and rival growth stocks by 13%, with growth lagging the market by 6%.<\/p>\n

Performance of MSCI EAFE Value vs MSCI EAFE<\/p>\n

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Source: Schroders, LSEG Datastream, MSCI<\/p>\n

In comparison, in the US, value underperformed growth by 17% and the market by 8% over the same assessed period.<\/p>\n

Lamont warned investors against \u201cincorrectly extrapolating US performance to the rest of the world\u201d, as otherwise investment opportunities are likely to have been missed.<\/p>\n

\u201cGlobal portfolios are loaded up on US mega-cap growth-style risk and have hardly any exposure to the wider opportunity set,\u201d he said.<\/p>\n

\u201cThe fact that many other parts of the market are performing differently, and better, than the US, amounts to barely a rounding error in many investors\u2019 returns.\u201d<\/p>\n

US 12-month return decomposition vs EAFE 12-month return decomposition<\/p>\n

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Source: Schroders, LSEG Datastream, MSCI<\/p>\n

\u00a0<\/p>\n

What is driving this divergence? <\/p>\n

Growth has long been the story of the US \u2013 with the Magnificent Seven stock leading the charge \u2013 and growth-focused companies have been rewarded for strong earnings, Lamont explained. EAFE-based growth companies have not been able to say the same thing, underperforming \u201cdespite having superior earnings growth\u201d.<\/p>\n

US growth stocks are not just technology, but some of this is due to classification. For example, Amazon and Tesla count as consumer discretionary, Lamont pointed out, while Alphabet is in communication services. All three would be considered by many to be technology-first businesses.<\/p>\n

\u201cPerversely, Meta is not a member of the MSCI USA Growth index [but] it is the largest stock on the MSCI USA Value index,\u201d Lamont added.<\/p>\n

Technology makes up just 14% of MSCI EAFE Growth, which has a more equally weighted array of exposures.\u00a0<\/p>\n

MSCI EAFE Growth and MSCI USA Growth weightings<\/p>\n

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Source: Schroders, LSEG Datastream, MSCI<\/p>\n

Meanwhile, across EAFE, \u201crising valuations have been in the driving seat for value and high dividend styles\u201d, Lamont said.<\/p>\n

These stocks have performed well despite weak earnings, which is \u201cpartly a reversal of the valuation extremes that existed previously, and which still exist in the US\u201d.<\/p>\n

In EAFE, growth and quality stocks historically traded on expensive valuations while value and high dividend stocks were cheap, said Lamont. Today, quality stocks are trading at a \u201cslight discount\u201d to historical valuations and are currently at the cheapest they have been versus value for around six years.<\/p>\n

\u201cEverything is much more reasonable, in isolation and relative to each other,\u201d he said.<\/p>\n

\u00a0<\/p>\n

Finding common ground <\/p>\n

But there are commonalities to be found between the US market and elsewhere, Lamont noted. Specifically, the 12-month \u201cterrible\u201d performance of quality stocks \u2013 a far cry from the outperformance seen over the long run in both the US and EAFE.<\/p>\n

Over the assessed 12 months, Lamont said quality stocks underperformed the market by 12% in EAFE and 7% in the US.<\/p>\n

\u201cIn EAFE, this has been so punitive that quality is also now well behind on a three- and five-year basis,\u201d he said, noting that the rate of underperformance over the past three years is \u201cnow the worst for around three decades\u201d.<\/p>\n

In contrast, the lowest-quality companies have performed the best for both the US and EAFE.<\/p>\n

\u201cIf we deal with the real problem children, those that were loss-making 12 months ago and are still loss-making today, they have outperformed companies that were consistently profitable by more than 10% in the past 12 months,\u201d he said.<\/p>\n

\u201cThere are relatively few companies that fit this description in the large-cap space (2% of EAFE companies and 5% of US ones) but the scale of their outperformance is noteworthy.\u201d<\/p>\n

12-month market cap weighted performance in dollar terms<\/p>\n

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Source: Schroders, LSEG Datastream, MSCI<\/p>\n","protected":false},"excerpt":{"rendered":"Investors could be missing out if they assume the growth story in the US is being replicated around…\n","protected":false},"author":2,"featured_media":19283,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[114,85,46,190],"class_list":["post-22243","post","type-post","status-publish","format-standard","has-post-thumbnail","category-markets","tag-business","tag-il","tag-israel","tag-markets"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/22243","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=22243"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/22243\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/19283"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=22243"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=22243"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=22243"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}