Investors will see the switch from Growth Investing to Value Investing in 2023-2024.

April 10, 2023


The S&P 500 is at a broad market inflection point where investors will now seek Value over Growth. The days of easy money from the banks are over. After many 75 basis point consecutive hikes in policy rates, the Fed has pivoted, but not to lower rates, only to a new series of 25 bp hikes. The thirteen-year period of money expansion from commercial banks is over. Bank loans will be hard to get.

As James Hodgins of Stifel Research Canada writes in his Portfolio Strategy notes today, the new focus will be on the strength of balance sheets. Full stop. This analyst has it right.

As credit tightens, corporations and consumers dip into cash reserves to carry on business and lifestyles. Eventually, without cash reserves, they must sell assets and slow production and consumption. This dynamic translates into the End of Growth Investing, at least for a few years and perhaps longer.

The switch to Value Investing means the market will encounter price multiples contraction, such as lowering Price-Earnings multiples in the stocks of the major market indexes and more focus on balance sheets.

I will be writing about this subject often.

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