Investors are favoring value stocks over growth stocks, with diversification key; market sentiment shifting
From Morningstar: 2025-03-31 08:01:00
The Morningstar US Market Index dropped 1.6% last week, with losses concentrated on Friday. The decline can’t be solely attributed to inflation or tariff concerns. The movement in interest rates, government bond yields, and value versus growth stocks point to shifting investor sentiment. Diversification remains key, with sectors like technology falling while consumer defensive and energy sectors rose.
Investors who favored value stocks over growth stocks a year ago now seem to be on the right track, with the Morningstar US Value Index outperforming the Growth Index by 4.3% over the last 12 months. Analysts emphasize the importance of patience and avoiding overreactions to market fluctuations.
Stock level diversification was evident among the “Magnificent Seven” stocks, with varying performances. While market anomalies can persist, active managers can benefit from individual companies reverting to fair value. Some markets are more favorable to active management than others, making it important to stay informed on how active managers are faring.
Despite a tough first quarter, weak market periods can actually strengthen long-term investment returns for those who continue to invest. Quarterly numbers are relevant for professionals, but meaningless for long-term investors. Economic data releases this week include the highly anticipated US jobs report on Friday, as well as the expected implementation of tariffs on US cars and auto parts on Tuesday. Consider staying informed with an economic calendar. 1. The stock market experienced a 2% increase today, with the S&P 500 reaching a new record high. This surge was driven by strong quarterly earnings reports from major tech companies like Amazon and Google, as well as positive economic data showing an uptick in consumer spending and job growth.
2. The United Nations reported that global carbon dioxide emissions reached a record high in 2021, despite efforts to reduce greenhouse gas emissions. Experts warn that this increase could have severe consequences for the environment, contributing to more frequent and intense natural disasters like hurricanes, wildfires, and heatwaves.
3. The CDC announced that the Omicron variant is now the dominant strain of COVID-19 in the United States, accounting for over 95% of new cases. This highly transmissible variant has led to a surge in hospitalizations, prompting health officials to urge the public to get vaccinated and follow safety guidelines to prevent further spread.
Read more at Morningstar: Markets Brief: The Rotation to Unloved Stocks Continues