Value outperformance should resume amid rates uncertainty, in the opinion of economists at UBS.

Price pressures remain, despite an easing of headline inflation

“Based on data going back to the 1970s, value stocks have outpaced growth when inflation is over 3%. The latest US consumer price index release for January has reinforced our view that inflation is only likely to fall below this level later this year.”

Fed officials have stressed that further rate hikes are essential, a greater potential drag for growth sectors

“Growth sectors tend to suffer more from higher rates since this reduces the current value of more distant profits. So, the recent hawkish tone of comments from top Fed officials could also tilt the balance between growth and value sectors.”

Tech, the largest growth sector, faces additional headwinds beyond rate worries

“The MSCI World IT sector trades on a 12-month forward price-to-earnings multiple of 22 times, 20% above the sector’s 10-year average, as of 13 February. By contrast, value sectors are generally more moderately priced. In addition, we expect global tech sector earnings growth to slow further due to a weaker enterprise outlook and lukewarm consumer demand.”