Since the lows recorded in March 2020, we have seen three different phases of the value recovery. The first was driven by cheap quality cyclicals. This was followed by the outperformance of the deep value Covid-19 stocks from early November amid developments of effective Covid-19 vaccines.
Since the start of this year, the acceleration on the vaccine front has changed market expectations with regard to timings for the reopening of economies, moving inflation and real yield expectations higher, a natural tailwind for value as a style. Therefore, the interest rate-sensitive segment of value (financials) has also started to outperform. This means that today the value rotation has become broader in nature.
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