Pros Talk Rotation To Value Stocks, Chances Of 'V-Shape' Recovery

Are investors rotating to value stocks? Will the economy experience a "V-shape" recovery?

Sector Rotation

Value stocks have been underperforming their peers in growth and momentum sectors, but this trend "started to turn a little bit in recent weeks," BlackRock strategist Wei Li said Friday on "Bloomberg Daybreak: Europe."

Value funds were among the few to see inflows of capital so far in June and funds like European equities could record its first monthly positive inflow after months of "significant" outflows.

"It appears that investor sentiment is turning around a little bit toward value and cyclical exposure so if this is an investment or if this is a trade -- the jury is still out there," Li said.

CNBC Chats With Economist Cited By Trump Tweet

U.S. President Donald Trump tweeted a quote from Morgan Stanley Economist Chetan Ahya who said: "We have greater confidence in our call for a V-shaped recovery, given recent upside surprises in growth data and policy action."

On Friday, Ahya was a guest on CNBC's "Squawk Box" to discuss the thesis behind his outlook.

The U.S. is on track to enter and exit the shortest recession in history for three reasons, Ahya said.

  1. The recession isn't the result of any large imbalances or private debt. Factors like these translate to a much longer recession.
  2. The 2020 recession won't see as much deleveraging pressure as was the case during the 2008/2009 financial crisis.
  3. The most important factor is that the response from the government's response is been "decisive and sizable" and will prove to be effective.

The global economy as a whole should fully recover to pre-COVID levels by the fourth quarter of 2020, led by a "pretty good" recovery in Asia. The emerging markets might take longer to recover and will reach pre-COVID levels by the fourth quarter of 2021, if not earlier.

Related Links:

How The COVID-19 Drop Has Potentially Set Up 'Another Long Economic Expansion'

4 Takeaways From Jerome Powell's Testimony On The Economy

Posted In: BloombergChetan AhyaWei LiFuturesEconomicsMarketsMedia