The comeback of the S&P/ASX 200 Index (ASX: XJO) from the record breaking COVID-19 market meltdown last February and March has been nothing short of stellar.
Since the March 2020 lows, the ASX 200 has soared 42%. If you've never witnessed anything like it, don't worry. No one has.
ASX 200 shares sprinted to record gains
While most shares gained strongly during the rebound, it was the ASX 200 growth shares that led the charge. Think of companies like ASX buy now, pay later (BNPL) darling, and Afterpay Ltd (ASX: APT).
Although down 34% since its 10 February 2021 highs, the Afterpay share price is still up 740% since 20 March 2020.
Other ASX 200 shares have underperformed the index and far underperformed growth shares like Afterpay.
With international and even most domestic air travel locked down for much of the past 12 months, the Sydney Airport Holdings Pty Ltd (ASX: SYD) share price has only gained 28% since 20 March 2020. While that may not sound like a small gain (and it's not), the Sydney Airport share price is still down 32% since 27 December 2019.
With these kinds of figures in mind, investors are increasingly wondering about the outlook for value shares.
For that answer, we turn to the experts.
Why these investment experts disagree on the outlook for value shares
If you were hoping for a unified answer, those months appear behind us.
As Bloomberg reports:
Societe Generale SA and JPMorgan Chase & Co. say value shares will keep outperforming at this stage of the market cycle. Prudential Financial Inc. and AlphaOmega Advisors LLC say the sector is due for a pullback.
Solomon Tadesse is Societe Generale's head of North American equity quant research in New York. According to Tadesse:
Value (and more generally cyclicals) still command significant valuation advantage to the rest of the market. Distressed out-of-favour assets tend to gain from potential multiple expansion at this point of the market cycle.
And JPMorgan Chase strategists led by Dubravko Lakos-Bujas write that:
Value remains an outsized beneficiary of reopening, which is still in its early stages… [W]hile we believe value and reopening trade still has room for upside, we would emphasize focusing on higher quality companies with greater staying power, for example retail and energy.
On the other side of the value share debate is Peter Cecchini, founder and chief strategist of AlphaOmega Advisors. According to Cecchini:
It's time to take money off the table now. Perhaps the latest round of stimulus will keep the cyclicals trade alive a bit longer, but I just don't see the cycle turning for good as we might expect after a normal recession. Staying tactical and nimble seems prudent.
As for Prudential Financial, as Bloomberg reports, Quincy Krosby, chief market strategist says, "The reflation trade is 'frothy' and 'waiting for a pullback is prudent'."
Krosby believes investors have been too optimistic about the massive new infrastructure cash splash proposed by United States President Joe Biden. She said that if investors sense issues within Congress that could delay or derail the package, shares could sell-off. Which, she says, could be the right time to buy the dip.
Foolish takeaway
So what's an ASX 200 investor to do?
I believe Peter Cecchini, quoted above, has it right. "Staying tactical and nimble seems prudent."
Happy investing.
