2020 US Equity Outlook

Volatility Can Bring Opportunity

Matthew Benkendorf discusses growth vs value investing, finding quality growth opportunities amid volatility and how to approach the markets in 2020.

The US market has become bifurcated with the best businesses getting better. Those growth stocks are not necessarily expensive given their quality and opportunity. As a result, investors should not expect to see a broad growth to value rotation. However, a narrow group of large companies may have gotten ahead of themselves, causing investors to pull back.

The market has become more efficient – good businesses are generally appreciated by investors. Such companies may be slightly less expensive than faster growth businesses but the difference is usually justified. Typical value businesses are not cheap, and those that are could be fundamentally broken. That said, there is potential value in financials and banks should economic growth continue and loan losses stay under control.

Warren Buffett’s idea that volatility can be your friend is worth noting. Uncertainty going into 2020 may cause unwarranted concern about good quality growth businesses, allowing investors to buy at attractive prices and reshuffle their deck of investments.