Summer style guide
Summer style guide
Summary
Economic conditions have been quiet over the past few months. There is some evidence of the effect of tariffs on US consumer prices, but economists expect the full effects to take time to be felt. US labour market data suggests that the economic backdrop is sluggish. As a result, the Federal Reserve is expected to reduce interest rates in September. But the biggest impact on monetary policy could well be the nomination by President Trump of a new head of the Federal Reserve. Trump has indicated that the new Chairman could be expected to cut interest rates in 2026.
Equities have risen on the back of better than expected results and the prospect of lower interest rates.
Equity style investing has been dominated by the US growth basket over many years. But the fact that European Value has outperformed European Growth since Covid suggests that style isn’t universal.
Style isn’t universal
Summer sun brings the accident of British beachwear. The old days of rolled up trousers and knotted handkerchiefs has yielded to the delights of Crocs and baseball caps. Progress?
Just as clothing fashions evolve, so do investment fashions and styles. One way that some investors analyse equities is to divide the available universe of stocks into ‘style’ baskets. Two common baskets are ‘growth’ and ‘value’. Growth can be loosely defined as those companies offering higher longer-term growth prospects and profitability, whilst value tends to be those companies that have lower (cheaper) valuations. Whilst not always mutually exclusive, more often than not companies can be viewed as ‘growth’ or ‘value’.
The growth versus value split is deeply entrenched in the US, and has been for at least 50 years, if not longer, with Warren Buffett once being thought of as a ‘value’ investor from the school of Graham and Dodd (with the first edition of their book Security Analysis published in 1934).
There have been distinct periods of one style outperforming over the past 30 years in the global equity market.
TMT (Technology, Media and Telecom) bubble: From the end of 1993 to the end of 1999, growth outperformed value as the internet bubble grew. Technology related companies rose in price and led to an investment bubble where companies attracted valuations that became extremely high.
Value-Led Regime (2000–2007): This period captures the aftermath of the tech bubble's inflation and eventual collapse. When the tech bubble burst in 2000, growth names sharply corrected, while more traditionally valued sectors like Financials, Energy and Industrials held firm or even rallied. Low interest rates fuelled a housing market bubble that led to the likes of the housebuilders and banks experiencing strong equity prices.
Growth-Led Regime (2007–2020): The global financial crisis of 2008–09 fundamentally altered investor preferences. Banks suffered reputational and balance sheet damage. Meanwhile, global interest rates plummeted, and monetary policy regimes turned persistently dovish, favouring long-duration assets and growth sectors such as Technology and Consumer Discretionary. The underperformance of value wasn't just cyclical—it became structural, with Financials and Energy lagging amid regulatory overhangs and weak demand growth.
US style returns: growth has outperformed value but with distinctive periods of underperformance between 2000-07.
Source: Bloomberg, Artorius
Covid Reopening Value rally (2020-2022): The post-COVID-19 recovery sparked a dramatic style rotation in non-US equities. Vaccine-driven re-openings, supply-side inflation and aggressive fiscal stimulus reawakened inflation expectations. Central banks increased interest rates. This shift in macro regime - characterised by tighter monetary policy, steeper yield curves and a cyclical recovery favoured value-oriented sectors.
This rotation of returns between growth and value were very similar between US and EAFE (Europe, Australasia and Far East) equities between 1995 and 2022. If growth outperformed in the US, then the same was the case for non-US equities. There was a case to discard the use of regional equity investing and become focused on style or ‘theme’.
Post-2022 Divergence: Value over here and Growth over there
However, since 2022 there has been a divide in the pattern of performance. In the US, growth has dominated performance driven by the technology giants Apple, Amazon, Meta (Facebook), Microsoft and Nvidia. In EAFE equities value has been much stronger, helped of late in Europe by the looser fiscal plans in Germany.
The pattern of performance of growth versus value have been similar over the period between 2003 and 2022, but have diverged since 2022 for US and EAFE equities.
Source: Bloomberg, Artorius
It is worth noting that that the outperformance of growth in the US has been built on strong earnings per share (EPS) from growth companies.
Investors have been continuously surprised by the earnings delivery of US growth stocks. If this continues then the style divide between value and growth may continue. The rebound of value in EAFE may be dependent on the improvement in the global economy and continued fiscal and monetary stimulus.
A waiting game
Over the summer months markets have been remarkably quiet. There is a waiting game for the full impact of US tariffs to be felt on US inflation. US interest rates are expected to be reduced in September as US labour market data is reflecting a weaker economic backdrop. Chairman Powell, the head of the US Federal Reserve, is set to retire in May 2026. President Trump is likely to propose a new Chairman in the coming months, who may well be more inclined to cut interest rates, especially as this is a stated aim of the Trump administration. Whoever is nominated by President Trump may elicit a market response that will balance the positive economic growth impact against the potential inflationary and bond market consequences of monetary stimulus.
US growth’s outperformance has been built on the delivery of stronger EPS from US growth compared to US value.
Source: Bloomberg, Artorius
Conclusion
Economic conditions have been quiet over the past few months. There is some evidence of the effect of tariffs on US consumer prices, but economists expect the full effects to take time to be felt. US labour market data suggests that the economic backdrop is sluggish. As a result, the Federal Reserve is expected to reduce interest rates in September. But the biggest impact on monetary policy could well be the nomination by President Trump of a new head of the Federal Reserve. Trump has indicated that the new Chairman could be expected to cut interest rates in 2026.
Equities have risen on the back of better than expected results and the prospect of lower interest rates.
Equity style investing has been dominated by the US growth basket over many years. But the fact that European Value has outperformed European Growth since Covid suggests that style isn’t universal.
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Artorius provides this document in good faith and for information purposes only. All expressions of opinion reflect the judgment of Artorius at 22nd August 2025 and are subject to change, without notice. Information has been obtained from sources considered reliable, but we do not guarantee that the foregoing report is accurate or complete; we do not accept any liability for any errors or omissions, nor for any actions taken based on its content.
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