Us value stocks are likely to reinvigorate as strong bets on the economy boost Treasury yields and boost cyclical-sensitive stocks. These stocks have stagnated in recent months after a strong rebound earlier this year.

The s & p 500 index of value stocks is up 5.5% from last month's low, more than 1 percentage point higher than the tech-heavy index.The index has accelerated over the past week, and despite stagnating after a strong start to 2021, the value index is up 18 per cent this year.

The move could herald a recovery in so-called reflation trading. Reflation trades bet on a rebound in economic growth, and value stocks have soared along with Treasury yields since the end of last year. The yield on the latest benchmark 10-year treasury bond has risen about 20 basis points since last week to 1.36 per cent.

Matt Peron, director of research at Janus Henderson Investors, said:

"I do think value stocks are a bit like a coiled spring, and they are likely to outperform the market for at least the next six months. I do think it can run one more lap. "

Investors point to several reasons for the optimistic outlook for value companies: while the increase in COVID-19 cases caused by the Delta variant is still unknown, there are signs that infection may be slowing in parts of Europe and the United States. this could mean that the blockade of last year will no longer be needed in the foreseeable future.

At the same time, some investors believe that US growth will remain strong even after peaking in the second quarter. According to the Oxford Institute of Economics, US GDP is expected to grow by 6.1 per cent in 2021 and 4.8 per cent in 2022, higher than the annual growth rate of the past decade.

Wells Fargo & CoSameer Samana, senior global market strategist at the Investment Institute, said:

"We haven't seen such a high growth rate for some time, which is why we think value investments can stay ahead."

JPMorgan Chase & CoTechnology strategists are also bullish on value stocks, saying in the past week that the S & P 500 is "on track to break through". Technology-based value stocks are expected to rise further in the next 12 months as the economic outlook remains strong and the earnings trend for technology stocks is weak, Truist Advisory Services said on Wednesday.

Since the 10-year treasury hit bottom last week, the s & p 500 value index has risen 2.4%, while the growth bond index is up just 0.5%.

The rebound in value stocks comes as investors digest data from the past week that suggest inflation may peak and look forward to the Fed's seminar in Jackson Hole at the end of this month. This meeting, or the Fed's next policy meeting in September, could signal when the Fed will start withdrawing its $120 billion-a-month government bond-buying program.

The monthly retail sales report in the United States and Walmart Inc will be released.And Target CorpThe results of retailers, such as those of retailers, may further reveal the health of consumers. On Friday, data showed that consumer confidence fell to its lowest level in a decade, putting pressure on bond yields.

Investors are also keeping a close eye on Treasury yields, which are often seen as a sign of economic optimism and could also boost value stocks. Higher yields are also particularly good for banks' profit margins, which tend to account for a large proportion of the value index.

Signs that novel coronavirus is threatening the economic outlook could lead investors to reinvest in large technology and growth stocks that have performed well for most of 2020.

Treasury yields have also experienced several big swings this year, which caught investors off guard. As recently as August 4, the yield on the 10-year Treasury note fell to about 1.13 per cent, about 65 basis points below this year's high.

Many investors may also be reluctant to oversell their holdings of growth stocks. In the 10 years after the 2007-2009 financial crisis, growth stocks dominated the market, while value stocks were in the doldrums.

Matthew Miskin, co-chief investment strategist at John Hancock Investment Management, said:

"this is an epic battle and there will always be a game between these two parts of the market."