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Value investing has fallen out of favor in a market dominated by FAANG stocks, but there are strong indicators suggesting a revival is possible. Currently, value stocks are priced significantly lower than their growth counterparts, trading at only a fraction of the cost. 

Even though they’ve lagged behind, the core business metrics, such as earnings, have remained competitive with growth stocks, implying the downturn isn't tied to company performance. 

Moreover, in times of rising inflation, value stocks historically outperform, and with inflation likely to stay above central bank targets, this could boost their appeal. Growth stocks shine in long bull markets but tend to struggle in bear markets or early recoveries, making value stocks a safer option during uncertain times.

Finsum:  For those looking to diversify, gradually increasing exposure to value-focused investments could offer solid returns as value stocks regain prominence.

Leading up to the much-anticipated rate cut, global investors increased their equity fund purchases, anticipating a rate cut by the Federal Reserve that would kick off a broader cycle of reductions. A total of $5.21 billion was poured into equity funds, slightly below the $6.54 billion invested the previous week. 

The Fed’s 50-basis point rate cut spurred risk appetite, particularly in Asia and Europe, where equity funds attracted strong inflows. Meanwhile, U.S. equity fund sales declined to a four-week low. Sector funds, particularly in financials and tech, saw outflows for the third consecutive week, while bond funds maintained their appeal, continuing a 39-week streak of net inflows. 

Additionally, precious metal funds attracted investors for a sixth week, while energy funds faced a reversal with net sales of $129 million. The data reflects increased confidence in riskier assets and a shift away from money market funds, which saw outflows after six weeks of positive investments.

Finsum: There are still two more rate hikes on the forecast if investors want to take note of these trends in equity markets.

The recent market gyrations and decline prompted some retirement investors to react by shifting their 401(k) investments from large-cap stocks and target-date funds to safer options like stable-value, bond, and money-market funds. 

The trading volume was nearly 700% the usual level, marking the highest activity since March 2020, during the onset of the COVID-19 pandemic. Despite the market's volatility, most 401(k) participants did not alter their accounts, but those who did generally moved towards more conservative investments to mitigate risk. 

The S&P 500 and Dow Jones Industrial Average both showed slight gains by the market's close but remained below their mid-July highs. However stable value funds received a bulk of the inflows at just over 60%.

Finsum: While the recent sell off was prompted by international currency fluctuations, expect more volatility this fall and potentially more inflows into stable value.

The July Consumer Price Index (CPI) data indicated that inflation is slowing, prompting speculation about a potential interest rate cut by the Federal Reserve in September.

 Ken Mahoney, CEO of Mahoney Asset Management, suggests that investors should focus on large-cap stocks, which have been performing well, particularly in comparison to small-cap stocks in the Russell 2000, where the majority of companies are unprofitable. 

He also expresses caution about sectors such as autos, airlines, and retail, noting a lack of enthusiasm in those industries. Keep in mind this combination of size and industry for the fall. 

Finsum: It’s important to keep an eye on leverage as interest rates fall this factor will greatly help the more levered companies. 

As market volatility persists, major equity indexes hit new highs, prompting investors to shift from AI and technology stocks to small-caps. The Dow Jones rose 700 points on July 16, achieving a record high, while the S&P 500 followed suit, driven by interest rate cut hopes. 

Natixis Investment Managers advises using selective, active strategies and high-conviction portfolio construction to navigate market peaks. They recommend not waiting for stock declines, as equity markets historically increase 70% of the time. 

For an offensive strategy, focus on growth-oriented, small, and midcap stocks. Active management and model portfolios can help manage risks and optimize tax implications.

Finsum: Prepping your portfolio for the fall election is more crucial than ever.