Value before growth in a sideways market

The US Federal Reserve is tightening the reins faster than expected. Bond and equity markets are likely to be more volatile in the new year and interest rates could rise. Value stocks and dividend stocks could outperform highly valued growth stocks.

The authors

DJE's team of analysts monitors and evaluates the markets on an ongoing basis using the in-house FMM method according to fundamental, monetary and market criteria. They summarise their findings once a month.

From the analyst team of DJE Kapital AG

The pandemic issue will certainly be with us for some time, but in our view it will no longer lead to a stronger stock market decline. Overall, we remain constructive for the remaining trading days of 2021 and for the beginning of 2022. A "sideways trend with a friendly tendency" should continue to be the most realistic scenario. Much will depend on the development of interest rates in 2022 after the US Federal Reserve's bond purchases expire: From the summer of 2022 at the latest, the Fed will eliminate an important demand component on the US bond markets. More volatility in bond prices and moderately rising interest rates are therefore likely. Value(1) stocks could therefore perform better than expensive growth(2) stocks in 2022. As in the previous months, we continue to focus on a balanced positioning without excessive sector overweights or underweights.



  • It will probably take some time before the Chinese economy picks up speed again
  • High energy prices could burden some companies in Europe


In our opinion, economic development could continue to surprise positively in Europe and the USA in 2022. In China, however, things should remain difficult for the time being, because even if Beijing were to start stimulating now, it will take time for the economy to pick up speed again. Above all, one must continue to keep an eye on the bond prices of the large Chinese real estate developers. A weaker development in the Chinese sales market could be a burdening factor as well as the high energy prices, especially in Europe. These can put pressure on the margins of energy-intensive companies, for example. We are therefore sceptical about companies with very high energy or personnel costs and little pricing power(3).



  • Volatility and interest rates should rise on the US bond market
  • Normalisation of inflation rates in 2022 remains base scenario

The inflation trend will remain one of the dominant topics on the capital markets. We continue to assume that there will be stronger relief, especially from the second half of 2022. Even if the Fed curbs its bond purchases (tapering) even faster than previously planned and up to three US interest rate hikes are on the cards in 2022, the outlook remains positive from a monetary perspective in our opinion: because of the previous measures, liquidity is still abundant. Interest rates should continue to rise moderately, but not to an extent that would be dangerous for the equity markets. The US Federal Reserve will no longer act as a significant bond buyer from summer next year, so we expect significantly higher volatility on the bond and equity markets in 2022. In general, the (US) bond markets are likely to be determined more by investors than by central banks again in the coming year. We therefore continue to focus on short durations. In Europe, on the other hand, there is no tapering discussion in sight yet, so Europe appears more attractive from a monetary perspective.


Market Technique

  • Clearly improved compared to the previous month
  • But: Market breadth overall not good
  • Record pessimism on the bond market

The market technique has improved compared to the previous month. The NAAIM(4) indicator, which measures the investment quotas of institutional investors, is currently back at just under 70% (after over 100% at the beginning of November). The US put/call ratio(5) has also returned to neutral after an overbought situation. Some technical indicators are currently giving buy signals, and the same applies to sentiment indicators such as the Fear & Greed Index(6). The market breadth, measured by the Advance-Decline lines(7), on the other hand, looks much worse: The Nasdaq(8) AD line, for example, is currently below the level of March 2020, when Corona caused a sell-off on the stock markets as a Black Swan. This shows that 70% of this year's Nasdaq rise is due to just five major stocks. In addition, there is record pessimism in the bond markets. Counter-cyclically, this remains positive for bonds.



  • Balanced portfolio is advantageous
  • No excessive overweighting or underweighting
  • Banking and insurance sectors attractive

We are sticking to a balanced portfolio allocation without too much overweighting or underweighting. Moderately rising interest rates and a possible improvement in credit demand should continue to support the banking sector in general. We therefore continue to regard the banking sector as attractive. The insurance sector also offers a very good risk-reward ratio in our opinion. There is much to suggest that value stocks should do better in 2022 and that 2022 could be a good year for dividend stocks - similar to what happened after the bursting of the technology bubble from 2004 onwards. To be sure, we are not ignoring profitable growth stocks. But in our opinion, caution is still advisable for highly valued technology and growth stocks. Regionally, we continue to favour Europe and the USA over emerging markets.


Currencies/Basic Resources/Gold

  • US dollar strength could continue
  • Precious metals and commodities remain under pressure

The recent strength of the dollar could continue, and commodities and precious metals in general are suffering as a result. In the short term, the US dollar appears somewhat over-speculated from a market perspective, but there is a tendency for the dollar to remain strong, partly due to the less expansionary central bank policy compared to Europe and the recently smaller US trade deficit. We are largely neutral on gold. ETF demand is still not picking up, and rising bond yields could weigh on gold.



1  Value strategy: Behind the value strategy is the idea that companies can be found on the stock market whose actual value is not yet recognised by market participants (undervalued companies).

2  Growth strategy: The growth strategy focuses less on analysing individual companies and more on looking at entire industries. The growth investor tries to identify future growth markets at an early stage and then select the companies with the highest growth dynamics.

3  Companies with high pricing power are those with strong brands, such as the iPhone giant Apple, or those that have occupied a strong market position, such as the software manufacturer Microsoft or the online retail giant Amazon.

4;  NAAIM (National Association of Active Investment Managers): The NAAIM exposure index tracks the average exposure of its members to the US equity markets. The NAAIM index is not forward-looking, but provides insight into the actual adjustments that active risk managers have made to client accounts over the past two weeks.

5  Put/call ratio = ratio between call and put options. If put options predominate, the prevailing opinion is that this indicates negative market sentiment (stock market sentiment). If, on the other hand, call options predominate, this indicates a positive market sentiment from this point of view. In fact, a rise in prices can often be observed after high put-call ratios. The PCR is therefore considered a contra indicator. It should be noted that under normal conditions fewer put options are demanded than call options; a balanced PCR close to 1 is therefore already considered an indication of slightly negative market sentiment.

6  The Fear & Greed Index is a sentiment indicator created by the US television station CNN Business (Cable News Network) to make the emotions of investors in the stock market measurable on a scale of 0 to 100. High values indicate extreme greed, low values panic. A value of 50 is considered neutral.

7  AD line (Advance-Decline line): Market breadth indicator that shows whether more stocks are rising or falling. In order to make a statement about the health of the broad market, indicators measuring market breadth are sometimes better suited than a stock index. Especially in the case of trend reversals (top and bottom formations), the "classic" stock indices are rather sluggish. This means that if, for example, a new bear market emerges and a large number of shares have already fallen sharply, this is only recognisable in the index quite late.

8  Nasdaq = National Association of Securities Dealers Automated Quotation System. Computerised stock exchange of US over-the-counter traders in New York. On the Nasdaq, particularly high-growth stocks are traded, but also speculative stocks, i.e. stocks that are susceptible to fluctuations.




Note: All information published is for your information only and does not constitute investment advice or other recommendation. Long-term experience and awards do not guarantee investment success. Securities are subject to market-related price fluctuations which may not be compensated for by the active management of the asset manager or investment advisor. This information cannot replace a consultation. All information has been provided with care and to the best of our knowledge at the time of preparation. Despite all due care, the data may have changed in the meantime. Further information on opportunities and risks can be found on the website The sales prospectus and further information are available free of charge in German from DJE Investment S.A. or at The fund management company is DJE Investment S.A. DJE Kapital AG is the distribution agent. A summary of investors' rights can be obtained free of charge in German in electronic form on the website at The funds described in this marketing document may have been notified for distribution in different EU Member States. Investors' attention is drawn to the fact that the relevant management company may decide to withdraw the arrangements it has made for the distribution of the units of its funds in accordance with Article 93a of Directive 2009/65/EC and Article 32a of Directive 2011/61/EU.