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Investors Shifted To Value Investments in February: S&P

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NU Online News Service, March 4, 2004, 2:00 p.m. – Standard & Poor’s reports that investors seem to be moving increasingly into value-oriented investments.[@@]

The research firm, based in New York, says it has noted the trend since the start of February, possibly signaling the market’s greater concern about valuations.

In its review of domestic mutual fund performance in February, S&P found that value funds have led so far this year across all market capitalization categories. While returns were solid across domestic equity fund styles, value funds’ outperformance is somewhat atypical for the second year of a bull market, when growth investing generally leads, S&P observes.

“In February, investors pulled back from the more aggressive styles that dominated returns over the past year and into January,” says Rosanne Pane, Standard & Poor’s mutual fund strategist. “Investors are now focusing on consistent earnings at attractive prices.”

February was marked by a rotation of investments into deeper cyclical issues, particularly materials and energy, as well as consumer staples, says Sam Stovall, S&P’s chief investment strategist. He notes that investors are probably looking to energy and materials as a hedge against inflation, while the interest in consumer staples may show concern about a possible interest rate hike.

Investors are continuing to favor smaller-cap issues, which S&P notes is unusual for the second year of a bull market. Small-cap funds lead so far this year, although mid-cap funds led in February. Investors may be shifting to less aggressive value issues, but they’re still looking for growth, S&P concludes.


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