Schroders Equity Lens September 2025: your go-to guide to global equity markets
Remove your US-tinted glasses: it’s been a “value” market outside the US, “growth” stocks have languished
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The September 2025 edition of the Schroders Equity Lens is now available: Schroders Equity Lens
Summary:
- In EAFE*, Value has outperformed the market by 6% and Growth stocks by 13% over the past 12 months. It has now outperformed Growth by 8% a year over three- and five-year horizons (slide 6)
- For investors waiting on the bell to ring when Value comes back into fashion, it’s already happened. Narratives can take a long time to catch up with reality
- This is the opposite to the US, where Growth has dominated over all reasonable time horizons
- Value has done so well in EAFE that European and UK value stocks are now ahead of the S&P 500 in total return terms over the past one, three, and five years in USD terms (and in local currency terms over one- and five-year horizons) (slide 7)
- The Quality style has had a particularly torrid time, both in EAFE and the US. In EAFE, its performance vs the market over the past three years is near its worst for three decades. In both markets, unprofitable companies have been outperforming (slides 6, 10)
- Investors should remove their US-tinted glasses and stop extrapolating US/global performance to the rest of the world (global is 70% US). This risks missed opportunities
- In EAFE, performance swings mean valuation extremes have largely unwound (slide 11):
- Value and high dividend yielding stocks are no longer cheap
- Quality is no longer expensive, Growth is no longer as expensive
- Argues for a more neutral, balanced style allocation, to increase chances of resilient returns
- Many overseas markets are performing strongly in fundamental and share price terms, but most investors have limited exposure to them, given the high degree of US mega-cap Growth-style concentration in the global market (slides 12-13)
- The case for unshackling yourself from the benchmark with a more active approach has never been greater.
- US broad market and style valuations are far more stretched in absolute terms, relative to each other, and relative to overseas markets (slides 11, 25-30)
- Investors have been happy to pay expensive prices to chase US stronger growth
- Foreign appetite to buy US equities rose further in June, while demand from US investors for foreign equities cooled (slide 40)
* EAFE = Europe, Australasia, and the Far East, a stock market index designed to represent global developed markets excluding north America.
Growth: companies with stronger historical and forecast growth rates. Value: companies which are trading on cheap valuation multiples, such as price/book, price/earnings, price/cashflow. Quality: companies with more stable operating performance, better return on equity, lower leverage, etc.
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