- We continue to see rotation opportunities in US Value-oriented equities and we expect Value leadership to continue as supported by i) elevated inflation, ii) rate hike cycle, iii) tighter financial conditions, and iii) undemanding relative valuation.
- Inflation headwinds and more lately, late-cycle dynamics such as slowing macro growth and moderating corporate profits, have started to materialise in the US. This necessitates a transition to a Value and defensive investing style. We recommend the JPMorgan Funds - US Value Fund.
- The fund not only provides strong value exposure but the investment strategy incorporates a Quality tilt by investing in high quality, conservative companies with relatively stable patterns of earnings at attractive valuations.
- The fund has a strong track record during periods of market weakness and economic uncertainties where it often outperformed other US Value strategies as well as its benchmark.
Chart 1: US Value has broadly outperformed its Growth counterpart since 4Q 2021
Why US Value?
Chart 2: Elevated inflation expectations are supporting US Value outperformance
Chart 3: The outperformance of US Value tends to occur around rate hike cycles
Chart 4: Strong correlation between the outperformance of US Value and tighter financial conditions
Chart 5: US Value index is trading at almost 40% discount to its Growth counterpart
A Value strategy for US equities
Chart 6: Portfolio sector breakdown and positions
Value fund with a Quality tilt
Chart 7: The fund's investment philosophy highlights the importance a Value and Quality approach
Combination of Quality and Value optimal for the road ahead
Strong track record during market weakness
Chart 8: Decline in ISM manufacturing index is often accompanied by weakness in US equities
Table 1: JPMorgan Funds - US Value Fund was more resilient and outperformed during periods of market weakness and economic uncertainties
Chart 9: JPMorgan Funds - US Value Fund managed to perform well YTD despite the relentless sell-off in US equities
Concluding thoughts
The Research Team is part of iFAST Financial Pte Ltd
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