Value retakes the lead as risk appetite revives

investmentweek.co.uk:

Sentiment was buoyed by the relative stability in long bond yields in the second quarter, reflecting well-anchored market expectations for longer-term inflation and interest rates.

According to factor analysis by FTSE Russell, value investing rebounded in most markets during a second quarter rally after faltering in the first quarter, with much of its outperformance coming in June as the US banking scare subsided and economic data remained surprisingly resilient.

Value was ahead particularly in markets with big exposures to the robust recovery in financials, namely emerging markets and Japan, as the banking crisis ebbed. 

Quality lost steam but held its own, however, doing best in markets with big tilts to high-flying tech stocks, particularly in the US and Asia Pacific.

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Sentiment was buoyed by the relative stability in long bond yields in the second quarter, reflecting well-anchored market expectations for longer-term inflation and interest rates. However, short yields spiked in the quarter as officials at major central banks signalled more rate hikes in the months ahead. 

As a result, yield curve inversions in the US, UK and Germany deepened as recession worries continued to loom large.

Overall market returns in the second quarter of the year revolved around varying progress in taming inflation and the implications for monetary policy. 

Following this year's global rally, forward P/Es for most investment factors are now in line or closing in on 10-year averages across markets, particularly in the US, Asia Pacific and emerging markets. 

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On average, quality and momentum factors remain the