Value stocks on the ASX 200 have surged ahead of their growth counterparts by 25% over the last financial year, the largest outperformance in more than 16 years.
The shift marks a decisive end to the decade-long dominance of growth equities, which had benefited from the low-interest-rate environment of the 2010s that boosted the present value of future earnings.
The rotation is being driven by structural changes in the federal budget, particularly tax reforms that are altering the relative attractiveness of different asset classes.
Investors are accelerating their shift toward exchange-traded funds (ETFs) in anticipation of upcoming capital gains tax (CGT) reforms, even though the changes are not scheduled to take effect for another year.
This forward-looking positioning is reshaping portfolio allocations across the Australian market.
The broader market has responded positively to the shifting dynamics.