Stocktake: Many stocks shrugging off market weakness

Thus far, 2022 has been a testing year for equity markets but many companies are doing just fine.

Despite the recent market weakness, Bespoke Investment notes the number of US stocks hitting new 52-week highs recently is its highest level since January 5th, when the S&P 500 was near all-time highs.

One usually sees such readings in exuberant times, but that’s not the case right now. Over 90 per cent of stocks hitting new highs are from defensive sectors, notes Bespoke – the highest number since pandemic fever gripped investors in spring 2020.

Globally, value stocks – companies that look cheap relative to fundamentals – have also done well in 2022. Value stocks have been the "clear winner" with double-digit gains this year, notes London-based FactorResearch founder Nicolas Rabener.

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Can value stocks continue to outperform? In the short term, no-one knows, says Rabener, but the long-term outlook is promising. That’s because the difference in valuation between the most expensive and the cheapest stocks remains very elevated relative to history.

In other words, global value stocks still look cheap, auguring well for long-term returns.