The Success of Value Investing Beyond U.S. Borders

I recently had a discussion with Daniel Rasmussen, an investor and author, during The Long View podcast. He noted that while value investing hasn’t been successful in the U.S., it has performed well internationally.

This remark caught my attention, prompting me to examine Morningstar’s indexes. It turns out that value investing has indeed thrived outside the United States, not just this year, but over the past three, five, and ten years as well.

‘Magnificent Seven’ vs. ‘Granolas’

In recent years, U.S. stocks across different styles have consistently surpassed international stocks. This is due to factors like a stronger dollar, better returns on invested capital, and increasing price multiples.

The U.S. growth index by Morningstar, featuring the “Magnificent Seven,” shows this dominance. In contrast, internationally, none of the companies has reached the $1 trillion valuation seen in the U.S.

Previously, stocks known as the “Granolas” were considered Europe’s potential counter to the Magnificent Seven. This group includes companies like GSK, Roche, Nestle, L’Oreal, and AstraZeneca. However, they never truly matched the Magnificent Seven in terms of performance.

Internationally, value investing has been buoyed primarily by the financial services sector, which benefited from rising interest rates, and the energy stock sector.

Looking beyond Europe with style

While value has outperformed growth in Europe over the past five years, Europe now represents less than half of equity market capitalization outside the US.

Rather, value stocks in emerging markets (like China, India, and Brazil) and developed Asia have outperformed by an even larger margin than in Europe.

The decline of Chinese internet companies, which were once big growth stocks, helps explain why value investing has triumphed over growth investing in emerging markets in recent years.

On the developed-markets side, Japan has seen rising interest rates and improved economic and investment conditions disproportionately benefit financial-services stocks, which tend to reside on the value side of the market.

Value’s underperformance in the US: Is it macro or micro?

While I have mentioned some macroeconomic factors above, I am generally skeptical of attempts to explain style leadership from the top down. Back in 2022, when sticky inflation prompted the largest interest-rate hikes in a generation, US growth stocks fell much further than value. A popular narrative arose: Growth stocks are more sensitive to interest rates.

But then growth bounced back in 2023 despite high rates. The Magnificent Seven and others rode a wave of enthusiasm for AI. Growth stocks’ thriving amid higher rates is hardly unprecedented. Between 2015 and 2018, the US Federal Reserve hiked rates several times, yet growth beat value by a wide margin.

Ultimately, I agree with Rasmussen that the triumph of growth over value in the US has more to do with “historically unique and rare circumstances.”

I’ve been following markets long enough to know that style leadership can be cyclical. Right now, it’s value investing that’s being fundamentally questioned.

Value stocks have been called “structurally challenged,” in “secular decline,” and “value traps.” But the value side of the market has always been home to troubled companies. Value investing is about stocks that under promise and overdeliver.

Perhaps the long-term cycle will turn again in value’s favor. AI could be revolutionary, but, like the internet, ahead of itself from an investment perspective. We could look back at 2025 as a historical inflection point, as marking a new market regime.

The problem is that these things are only clear in retrospect. It will take time to know if the rotations we’ve seen in early 2025 will last, or if they’re just head fakes.

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This article was provided to The Associated Press by Morningstar. For more markets content, go to

Dan Lefkovitz is a strategist for Morningstar Indexes.