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In recent years, the performance of value stocks has outperformed growth stocks. It is probably one of the best-kept secrets in stock markets that bond yields have a larger influence on returns than corporate earnings, at least for shorter timeperiods like one year. If a company’s profit outlook improves, this will influence the expected profit for this year, next year and maybe the year after. But the impact of an improved profit outlook quickly fades. Meanwhile, if government bond yields change, they influence the discount rate applied to all future profits. Thus, even a small movement in government bond yields can move markets considerably.

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