Value investors trace their roots to the famous "Security Analysis" textbook, written by Ben Graham, an economics professor at Columbia University. In the 2000-2010 decade, which included two bear markets and the Great Recession, value stocks were better performers than growth stocks, advancing an admittedly low 8% (but still better than growth, which declined 15% during the decade).
In nine of the past 10 years, growth stocks have topped value stocks.
Since 2010, the Russell 1000 Growth Index has climbed more than 600%, compared to an advance of 300% for the Russell 1000 Value Index. Indeed, for the past decade, the performance record has favored growth. Value stocks - a market segment that includes high-yield stocks - are outperforming growth stocks in 2022 for the first time since 2016. We will reconsider Cryptocurrencies once the sector approaches total market capitalization of $5 trillion, or the regulatory outlook becomes clearer. We still think it is early to be adding volatile Bitcoin-related securities to our model portfolios at this time. In our view, Commodities should constitute up to 3%-5% of portfolios, with Copper and Paper/Corrugated Packaging having the most exposure due to positive long-term secular trends behind e-vehicles and e-commerce. Given high inflation, we think Commodities will remain in demand and are the best-positioned alternative. In theory, consumers, investors, and traders are all attracted to Bitcoin. The approximately $1.0 trillion Cryptocurrency market has tumbled in recent months from $3.7 trillion amid a high level of volatility and a risk-off move in financial markets.
Each of these is better than Crypto, of course. Real Estate held up early in the year - but as interest rates have risen, the benchmark ETF IYR has fallen sharply and is down 21% YTD. Only one of the alternatives (Commodities) has provided a respite for investors in 2022, with returns of 7% on the commodity benchmark ETF DBC. The most popular alternatives include Gold, Real Estate, Commodities, and, recently, Bitcoin.
Daily Spotlight: Alternative Investments Weak as WellĪlternative investments are supposed to hedge against stock and bond market weakness.
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