There are plenty of reasons for investors to feel uncertain today, and markets are undergoing a significant repricing of risk. This repricing has been especially hard on stocks that had previously led performance.
Performance trend reversed
valuation premium
has disappeared
Where are opportunities?
Growth Performance Has Reversed Long-Term Trends
The Growth Valuation Premium Soared Above Its Average
Where we see opportunities now
Despite heightened uncertainty and negative headlines, transformational change continues largely unabated in a number of growth sectors. Technology is an important component of this change, but we are finding exciting opportunities across industries.
19.3%
15.5%
12.2%
7.5%
1.6%
From 1997 to 2021
The Fastest Growers Have Outperformed...
Quintiles
1
2
3
4
5
1997-2021
2021-2022
-11.8%
-1.2%
3.3%
5.4%
9.4%
But in 2021-2022
The Slowest Growers Have Outperformed
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The growth valuation premium peaked at 10.1 during COVID-19 as economic shutdowns drove up demand for technology.
But the “COVID-19 premium” has disappeared over the past several months.
Today, the growth valuation premium of 3.1 is closer to its long-term average.
Average = 4.4
DEC 2018
Jun 2019
Dec 2019
Jun 2020
DEC 2020
Jun 2021
10.1
3.1
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GROWTH INVESTING HAS CHANGED DRAMATICALLY OVER THE PAST SIX MONTHS
Notes
1997-2021: Data based on rolling 5-year returns for periods from 12/31/92 to 12/31/21. Source: Jennison, FactSet. Average median annualized returns of stocks over rolling 5-year periods, ranked by 5-year historical earnings growth quintiles (1=highest, 5=lowest). Quintiles are rebalanced quarterly. Past performance does not guarantee future results.
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Notes
Enterprise Software
Healthcare Innovation
Luxury Brands
Smart Electric Vehicles
2021-2022: Data based on trailing 1-year period ending 4/30/22. Source: Jennison, FactSet. Period returns of index stocks, ranked by 5-year historical earnings growth quintiles (1=highest, 5=lowest). Quintiles are calculated based on beginning of period shown. Past performance does not guarantee future results.
Data from 11/30/18 to 6/30/22. Source: Jennison, FactSet. Calculated monthly. The “Average” reflects data from 12/31/99 to 6/30/22.
Valuation Differential
Average
S&P 500 Growth Index Forward P/E Multiple minus S&P 500 Index Forward P/E Multiple
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Russell 1000® Index Performance by Historical 5-Year Earnings Growth Quintile (1=Highest, 5=Lowest)
Russell 1000® Index Performance by Historical 5-Year Earnings Growth Quintile (1=Highest, 5=Lowest)
Russell 1000® Index Performance by Historical 5-Year Earnings Growth Quintile (1=Highest, 5=Lowest)
Dec 2021
Jun 2022
DEC 2018
Jun 2019
Dec 2019
Jun 2020
DEC 2020
Jun 2021