Lazard’s Warryn Robertson on why there’s more pain to come for growth stocks and why his fund doesn’t invest in Chinese shares.
Have markets priced higher rates into the mega-cap tech stocks?
The second point is about valuation levels on them as a cohort. We still think they are relatively unattractive. For a long time, the market was pricing these stocks on incredibly low interest rates. Technically speaking, when rates are rising, or are expected to rise, investors need to discount cash flows at a higher rate.
Furthermore, the rising interest rate environment and structurally higher inflation has historically favoured value over growth.Rising rates are generally negative for growth companies, which are expecting to make the bulk of their profits in the future, and relatively better for value companies, where more of the earnings are expected in the nearer term.
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