As stocks cross into the next decade at records, one top investor sees a major market shift underway toward value and away from growth.
has increased 41%. Value stocks are seen as undervalued relative to the market, while growth stocks are names that investors will pay a premium on for earnings growth."It's driven by several narratives. One narrative is that growth is 'growthier' than it used to be. Objectively not true. Another is that gross margins are better than they used to be. Objectively not true," said Arnott.
He says this moment could prove a "spectacular opportunity." He is betting on a big move higher in the Research Affiliates' RAFI fundamental index, which has a value stock lean and has outperformed even the broader value group. Arnott also says a rotation to value could be critical with the potential of an economic slowdown on the horizon.
"If there's an economic slowdown — Warren Buffett famously said when the tide goes out you see who's standing naked, and growth stocks are built on a presumption of growth," said Arnott.
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