Three market myths about value investing
August 13, 2024
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4 min read
Bill Nygren, CFA®, CIO-US and Portfolio Manager at Harris | Oakmark, debunks three myths associated with value investing and explains why investors shouldn’t overlook the category given today’s markets and upcoming US election:
- Myth 1: Value stocks require a robust economy. In fact, the Russell 1000® Value Index shows value stocks tend to do poorly when the economy is bad. So we believe that unless you are expecting a bad recession, which is rare, you may want to ignore the economic outlook when you're considering adding value to your portfolio.
- Myth 2: Investors think value requires rising rates. We believe that unless you think rates are in for a very significant drop, you should ignore them when considering how much of your portfolio you want allocated to value.
- Myth 3: Election years are a bad time to be a value investor. The data says otherwise. Historically, the S&P 500® Index has delivered 11% returns during election years since 1928, while the Russell 1000® Value Index has delivered 10.5% returns during election years since 1980.
CFA® and Chartered Financial Analyst® are registered trademarks owned by the CFA Institute.
The information, data, analyses, and opinions presented herein (including current investment themes, the portfolio managers’ research and investment process, and portfolio characteristics) are for informational purposes only and represent the investments and views of the author and Harris Associates L.P. as of July 23, 2024, and are subject to change without notice. This content is not a recommendation of or an offer to buy or sell a security and is not warranted to be correct, complete or accurate.
All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided. Investors should fully understand the risks associated with any investment prior to investing.
Investing in value stocks presents the risk that value stocks may fall out of favor with investors and underperform growth stocks during given periods.
The S&P 500 Total Return Index is a float-adjusted, capitalization-weighted index of 500 US large-capitalization stocks representing all major industries. It is a widely recognized index of broad, US equity market performance. Returns reflect the reinvestment of dividends. This index is unmanaged, and investors cannot invest directly in this index.
The Russell 1000® Value Index measures the performance of the large-cap value segment of the US equity universe. It includes those Russell 1000® companies with lower price-to-book ratios and lower expected growth values. This index is unmanaged, and investors cannot invest directly in this index.
Natixis Distribution, LLC (Member FINRA | SIPC), a limited purpose broker-dealer and the distributor of various registered investment companies for which advisory services are provided by affiliates of Natixis Investment Managers, is a marketing agent for the Oakmark Funds.
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