Shares in innovative growth companies have performed spectacularly well over the years; however, in more recent times, they have experienced an equally spectacular sell-off. Investors have been left wondering when, and if, it is time to get back in.
Over a three-year period to market peak in mid-November 2021, the MSCI ACWI Growth index outperformed the broader market by 33% and the ACWI Value index by 63%. Market rotation has however eroded that gain, and over a three-year period to mid-July 2022, this gain has all but disappeared. As growth companies outperformed, they also re-rated, and in those three years the MSCI ACWI Growth index forward price-to-earning ratio increased from c.17x to almost 30x. The whole market had become ‘growthier', as benchmark weights of the growth companies - from the FAANGs to Tesla - increased. The...
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