AIVL - StyleBox Update: Value Still Outperforming Growth; International And Non-U.S. Ripe For A Weaker Dollar

Summary

• 2022 was the first year since 2016 that value investing thoroughly trounced growth investing.
• Growth had a nice spurt off the lows in June and October ’22 but the higher 10-year Treasury yield is acting like a wet blanket for growth stocks.
• I continue to think that non-US investing opportunities have a compelling risk/reward when looking at the 10 and 15-year annual returns.

2022 was the first year since 2016 that value investing thoroughly trounced growth investing.

Click on the above table and you can see the progression between growth and value amongst the large-cap, mid-cap and small-cap asset classes.

It should be no surprise to readers: growth had a nice spurt off the lows in June and October ’22, but the higher 10-year Treasury yield is acting like a wet blanket for growth stocks.

Don’t ignore the annual return or “annualized” data found in the bottom left-hand corner of the spreadsheet. Longer-term large-cap growth returns still look too high, although the 3-year return is now more normal so to speak.

Non-Us Ripe for a Continued Drop in the Dollar:

Looking at annual return data, there is no question non-US and International look ripe for some robust returns, particularly looking at the 10-year and 15-year annual returns.

But what’s the catalyst? Maybe, a weaker dollar.

The last time non-US did really well for an extended period was the decade from 2000 to 2009, when large-cap growth imploded with the March 2000 peak.

Maybe, the negative returns this year in the non-US asset class (the tickers listed above are non-US and international ETF’s including international mutual funds) can’t be faulted given Ukraine's and China’s issues, but China is supposedly set to begin re-opening and Ukraine may be a non-issue moving forward if it remains in stalemate.

This isn’t a prediction, but I continue to think that non-US investing opportunities, meaning international and emerging markets, have a compelling risk/reward when looking at the 10 and 15-year annual returns.

This blog is just waiting for a stronger signal to allocate more funds to non-US investments, like the Oakmark International Fund ( OAKIX ) or the emerging market ex-China ETF ( EMXC ).

This is a big-picture analysis. These shifts take time to develop, so take it all with a dose of skepticism.

Thanks for reading.

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Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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