Recovery’s Speed Will Determine Which Market Segments Succeed

The economic recovery’s pace likely will dictate the relative performance of segments within the global stock market.

AMG’s base-case investment strategy foresees U.S. economic output, or GDP, recovering to 2019 levels by early 2022. Historically, this pace should be sufficient to propel value stocks over growth stocks, small- and mid-cap equities over large caps, and foreign stocks over domestic in relative terms.

A slow meandering recovery in which growth recovers to 2019 levels later than expected could curtail that outlook. A sluggish recovery, although less likely in AMG’s view, would probably favor U.S. large-cap growth stocks. A faster recovery is also a possibility, and AMG’s strategy could do even better under that scenario.

AMG expects the recession to hit bottom in the second quarter, and recovery to be underway as economies around the world reopen. In addition, each of these favored market segments is relatively cheap. The combination of a profit recovery and lower cost should lead to gains over the coming 12 to 24 months, and regardless of “tilts” and “exposures,” AMG expects stocks will outperform bonds over the next few years.

To learn more, contact your AMG advisor.