Chart in Focus: Is growth investing still dominating?

The divergence stems from several factors- the US tech sector’s global dominance and concentration in growth indices, stronger earnings momentum in US growth names, and regional index sector composition differences. Europe and Japan have higher weights in value-heavy sectors like financials and industrials, which have benefited from rising rates and economic normalization.

Structural factors have led to divergences in the regional outcomes of growth vs value strategies that we believe could continue even as transformative macro developments are underway.

Investment implications

• Europe and Japan remain fertile ground for value investing, given value-oriented sectors like financials and industrials are heavier index weights compared to the US, thus creating more opportunities to add value. Value has benefited from rising rates, and historic levels of fiscal stimulus announced this year could lift value-oriented sectors further as domestic demand accelerates.
• We expect growth investing in the US to remain a powerful force, driven by innovation, scale, and strong balance sheets. We continue to favor quality growth - companies with durable earnings, pricing power, and strong free cash flow, particularly in sectors like technology and healthcare.
• While these fundamentals may continue to influence regional growth/value outcomes, trade policy remains the unknown that could warp sector outcomes globally. US tech (growth) faces protectionist export bans and global digital taxes while European industries dependent on exports (value) could face tariff headwinds.

What we are watching

• Earnings season: Whether value sectors like financials and industrials can maintain earnings momentum relative to growth-heavy sectors and remain resilient in light of final tariff policy.
• Monetary and fiscal policy divergence: Central bank paths across regions may continue to influence style leadership, particularly if rate cuts accelerate in the US while remaining slower elsewhere. Most regions seem poised to ramp up fiscal spending, but final implementation and effectiveness could differ.
• Sector rotation: Watch for signs of renewed interest in value sectors globally, especially if inflation remains sticky or if economic growth broadens beyond tech-led narratives.