The Old Economy Strikes Back
After the trauma of the Great Recession, the U.S. economy experienced years of sluggish growth as Americans paid down debt and saved money to repair their balance sheets. Consequently, investors started to pay more for a narrow group of technology and software stocks that could deliver outsized growth in a low-growth world. As the pandemic winds down, Americans are flush with cash, have low debt levels, and are urgently looking for ways to spend it as inflation reduces the incentive to hold cash.
As a result, economic growth is accelerating, leading to a broader group of “old economy” stocks that could deliver above-average growth to investors while offering attractive valuations as opposed to the nose bleed prices we see across stocks that have dominated the “new economy” such as software, clean energy, and e-commerce. Our research suggests that the leadership shift to value stocks will define the 2020’s and offer investors the best chance to outperform.
- Strong labor markets are not a symptom of recessions
- Buy old economy stocks and sell the “new economy” craze
- Energy and banks stocks are leading the shift to value
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