US value stocks may continue to outperform

While the long-running underperformance of US value stocks relative to growth stocks seems linked in part to lower interest rates and structural weakness in the economy, much of it is hard to attribute to such macroeconomic fundamentals. This insight informs our view that value stocks will outperform in the coming years, as some of the valuation gap between indices of US growth and value stocks unwinds. The recent jump in US real yields, which we expect to continue, might be the trigger for such a reversal.