ACI "Excessive Decline in Growth Stocks... Investment Should Be Maintained from a Long-Term Perspective"

Excessive Preference for Value Stocks Leads to Overvaluation

[Asia Economy Reporter Minji Lee] Global asset management firm American Century Investments (ACI) emphasized the need to adhere more firmly to long-term investment strategies. Although value stocks have shown relatively superior profitability so far, the negative outlook on growth stocks has been excessively widespread, leading to the judgment that they have higher investment appeal in the long term.

On the 5th, ACI analyzed in a report that supply chain disruptions, interest rate hikes, China's lockdown measures, and food and fuel shortages caused by war are burdens for both companies and investors, further freezing investment sentiment. The report further forecasted that these issues will trigger a recession or stagflation due to continuous inflation increases and the Federal Reserve's tightening efforts.

This year, the U.S. 10-year Treasury yield nearly doubled from 1.6% at the end of last year to the 3% range recently, causing turbulence in the Treasury and corporate bond markets. Global index volatility increased, with the MSCI All Country World Index posting a negative 13% return as of the end of May since the beginning of the year. Positive performance this year was limited to certain industries such as energy, mining, and tobacco producers. While value stocks outperformed the market return, traditional growth sectors like consumer discretionary, media, and information technology showed poor returns.

Bernard Chua, Senior Client Portfolio Manager at ACI, stated, "It is true that value stocks were relatively less affected by the strong inflation rise and significant interest rate hikes. However, if economic growth slows and inflationary pressures ease, companies that can continuously increase profits will receive higher premiums, making the outlook for growth stocks more positive."

The report emphasized that if inflationary pressures ease along with the side effects of interest rate hikes, the performance of growth stocks, which has been weak for some time, is likely to improve significantly. Manager Bernard Chua added, "It is very difficult to predict which factors will have the greatest impact on the market going forward and the direction of inflation. However, it is important to establish and maintain investment principles from a long-term perspective rather than reacting excessively."

Meanwhile, ACI, founded in 1958, is a global asset management firm with over 1,400 employees located in New York, London, Frankfurt, Hong Kong, Sydney, Santa Clara in California, and Kansas City in Missouri.

This content was produced with the assistance of AI translation services.