- Value shares perform despite the correction
- Companies look ahead to higher interest rates
Contemplating the sea of red in the US markets is a curious case of being proved both right, while at the same time trying to stay invested. It is worth noting that on a 12-month basis, the S&P 500 is still 5 per cent up. But the falls over the past quarter have seen it inch towards a 20 per cent drop from its year highs, which qualifies as a fully-fledged bear market, although currently it is still technically a correction. Unsurprisingly, this has also affected our mid-cap value share portfolio, with one or two interesting exceptions. It seems that those shares that escaped the worst of the New Year rout share defining characteristics, despite being in radically different industries – namely an ability to generate operational gearing on a fixed cost base. The correction in the market does illustrate another investment truism: shares bought at an initial discount to the index will always perform better once those with higher valuations start to fall.