Discover the fund style that's making a breakthrough

The past decade in stock markets has been an era of growth, but the tables are turning after a resurgence for value over the last 12 months.

Since last summer, the MSCI ACWI Value index has outperformed its Growth equivalent, in a reversal of the 10-year trend.

This has started to feed through into monthly fund performance. Two of the best performing funds in July had a ‘value’ focus, namely Schroder UK Mid 250 and TM Brickwood Global Value and funds in more cyclical sectors like energy were also creeping up the performance charts.

Explaining growth and value

Growth and value are two different investment styles. Growth investing involves finding businesses expected to increase revenue and earnings at a faster pace than the wider market. These names will often reinvest their profits to fund further expansion rather than pay out dividends. Growth investors may also be less concerned about the upfront valuation they pay.

Value investors, in direct contrast, look for stocks they consider to be undervalued, many of which may pay regular dividends, in the hope this value can be unlocked.

In the ultra-low interest rate environment of the 2010s, a period which also saw sluggish economic growth, companies which could chalk up meaningful growth were highly prized. Technological advancements also helped supercharge the profits of a handful of large tech names.

Find out why the biggest growth and value investors can hold the same stocks in our article on how to avoid doubling up with popular funds.

Why did growth outperform for so long?

This decade of growth was a move away from the longer-term relationship between the two styles.

From mid 2007 to late 2020 value’s underperformance universally across geographies, sectors, metrics and asset classes was the longest such period that value had endured since the Second World War, research by JP Morgan found, culminating in the 2020 pandemic, during which value had the worst year in recorded history.

JP Morgan fund managers Joyce Weng and Ian Butler wrote back in 2022 that “the worth of an asset – especially those whose cash flows come in the far future – partially depends on the cost of capital. When capital is cheap, investors invest in the future, but if capital is expensive, investors demand their returns today. We have been living in a world where the cost of capital has been negative, and as a rising tide lifts all boats, falling rates lifted all Growth stocks.”

“Given this favourable backdrop, not only did earnings growth of growth stocks outpace that of their value counterparts, but more importantly, their valuations re-rated across the board, significantly and indiscriminately. There was no regard for whether this growth was realistic or illusory, sustainable or speculative, and the resulting rise in valuations masked many issues with some of the hottest growth companies.”

There have been pockets of time when value went ahead of growth. After Pfizer’s announcement of a Covid vaccine, value stocks jumped because investors anticipated a rapid reopening of the global economy from lockdown and shifted from the pandemic’s stay-at-home-tech stocks into the beaten down airlines and hospitality sectors.

This momentum didn’t last and value didn’t get any meaningful time in the sun until 2022 and the outbreak of war in Ukraine.

The supply chain and geopolitical chaos Russia’s invasion caused sent the majority of developed economies into an energy price shock, causing inflation to rocket and interest rates to be hiked.

Why is value doing well again now?

A value ‘comeback’ call may understandably raise eyebrows when we continue to see markets dominated by a handful of growth stocks, particularly in the US, push to record highs.

And while a year isn’t enough to call a swing in sentiment, the positive performance of value happening in tandem with a strong market is worth paying attention to.

The main reason why value is outperforming growth right now is that market gains are broadening out beyond tech, as investors look to diversify from the all-conquering AI theme.

There has been an appetite for cheaper, more cyclical and asset heavy sectors which tend to sit more in the value realm like energy and infrastructure.

Meera Pandit a global market strategist at JP Morgan, discussed in February 2026 three factors which were playing a role, all of which continue to do so.

First, is the evolution of the Magnificent Seven.

“In 2023, all Seven stocks easily beat the S&P 500; in 2024, six did. Then, last year just two did, and the magnitude of outperformance shrank considerably”, Pandit said.

Second, was a recovery in quality stocks, “creating a better environment for stock pickers focused on profitability, strong balance sheets and favorable relative valuations”.

And finally, value has provided some diversification from a more volatile tech sector. The UK market’s FTSE 100 and FTSE 250 indices are examples of this. Both are more weighted towards value than many of their global counterparts, and both have reached record highs so far this year.