US stocks: The comparison of value shares of Glos stock is a new round of adjustment


■ The adjustment of Glos shares relative to value shares caused by the rapid rise of real interest rate seems to have ended
■ The trend of the real economy and corporate profits are the decisive factors in evaluating the future of stock prices

  The adjustment of the S&P 500 Glos stock index (hereinafter referred to as Glos) relative to the same value stock index (hereinafter referred to as value type) is about to end. Looking at the Gloss/value multiples to understand the relative advantages and disadvantages of growth and value, we found that due to the aggressive monetary easing policy after the COVID-19 epidemic, the multiples will increase from 1.5 times to 2.3 times from the beginning of 2020 to the end of 2021, becoming a place of global stock advantage. The main reason is that the real interest rate (yield of 10-year US treasury bond bonds - 10-year expected inflation rate, BEI) has fallen to more than negative 1%, and the Glos stock rate, which is strongly inversely related to the real interest rate, has risen significantly. However, from 2022, with the Federal Reserve Board (FRB) actively raising interest rates, the real interest rate will rise from about - 1% to over+1.5%. Glos shares adjusted significantly, and the recent multiple fell to about 1.6 times.

  The same ratio reflects the difference of earning-per-share (EPS) growth rate between Glos stock and value stock. The upward trend of 2020-2021 will be adjusted in 2022, and is now returning to the continuation trend of 2014-2019. This indicates that the adjustment of Glos stock to value stock is about to end, and the sensitivity of growth to the change of real interest rate is judged as normalization. On the basis of recognizing the prospects of American stocks, although the trend of interest rates is still continuing, the trend of the real economy and corporate performance has become a more decisive factor, which is worth understanding.