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As many high-flying stocks are derated and investors jump ship due to stagflation fears, value stocks will be in favor, says Douglas Maple-Brown of Maple-Brown Abbott, adding that valuations still have a ways to fall. His firm has begun restructuring portfolios in order to jump on the burgeoning opportunities in the current market, reports an article in Financial Standard.
With so many top-rated stocks still at record highs, those stocks are at risk for tumbling off their pedestals and trading below long-term averages for quite a while. That situation would be ideal for value investing, Maple-Brown told Financial Standard. Meanwhile, John Lobb, portfolio manager at Insync, told the outlet that many investors are focused on the negative news cycle instead of looking at where the opportunities are. He pushed back on assertions that energy prices and supply-chain costs will continue to rise, pointing to the drop in net carbon demand amidst loosening oil intensities in economies, and shipping bottlenecks that have started to open as pandemic-related logistics work themselves out. Lobb also noted that valuation de-ratings are not earnings de-ratings, the article reports.
Inflation could very well be close to peaking, Lobb said, and, taking interest rates into account, equity markets hold more upside risk than downside risk. Allocating away from equities at this point could be the “risk-on call” and drag down a portfolio, he added. In general, Lobb expressed Insync’s belief that the second half of 2022 could be turn out to be very different than the first half.