In my Investing Career, have seen some major Equity Rallies and Corrections but one aspect that can never be ignored is the importance of “Valuations”.
Valuation Divergences in the past have taught us a lot of lessons which needs to be kept in mind while taking Investment Decisions.
Currently in the Year 2020, Growth Vs Value YTD Performance Spread is very high.The 2018-20 phase has seen handful of Stocks driving the markets. Our Stance is to stay away from these extreme stocks and invest in companies where valuations are attractive compared to the broader market.
The Current Valuation Divergence may lead to Triggers for Style Rotation in our view, some of the reasons for it can be as follows:
- US Elections
-Reflation and Interest Rates
- USD Weakening
- Globally greater focus on fiscal expansion
- Valuations Difference between Value and Growth is close to all time highs.
On the Debt side we would recommend adding Spread Assets to the portfolio and look at investing in Accrual based Products.