Oct 29, 2021
Investors’ Chronicle: Schroders, Petrofac, HSBC
Lower bond yields mean that investors apply lower discount rates to future cash flows, raising their present value. If investors fear that tighter monetary policy would do serious economic damage, they would dump cyclical value stocks even more than growth stocks. The much nicer possibility for value investors would be if bond yields rise because markets anticipate stronger economic growth. They'd benefit relative to growth stocks as higher yields cause investors to dump the latter in favour of shorter-duration stocks. There's a big risk that value investors will suffer further disappointment.
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