HEAD-TO-HEAD: Alliance Bernstein versus MFS

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Natalia Wolfstetter, Morningstar

Introduction

US equities have been on a long winning streak, piling on gains year after year.

The US equity market outperformed international markets once again in 2021, and this time by a wide margin. The S&P 500 sprinted higher by 26.9% for the year, not including dividends, while broad European and international indexes rose by 14.1% and 10.1% in dollar terms, respectively, and emerging markets and Asia outright declined, Kelly Bogdanova, vice president and portfolio analyst at RBC Wealth Management, said in a research report.

“While we anticipate positive returns for the S&P 500 in 2022, and we would continue to moderately overweight the US equities to start the year, at this stage, we do not recommend significantly overweighting the US exposure at the expense of international equities,” Bogdanova said.

Meanwhile, the Federal Reserve is likely to see where inflation settles before raising rates. But it now appears to be taking inflation risks much more seriously, with a rate hike now very much in play as soon as March, according to Brian Nick, chief investment strategist at Nuveen.

Indeed, equity markets have begun 2022 with an abrupt change in leadership from defensive and higher growth stocks to cyclical and value names, he said.

Energy stocks are off to a roaring start while financials are benefiting from higher rates and a slightly steeper yield curve.

“Our view coming into 2022 was that strong economic growth and benign disinflation would propel real interest rates higher and help recent underperforming segments of the market to outperform – including the eurozone and US value stocks,” said Nick.

Against this background, FSA asked Natalia Wolfstetter, director of fund analysis at Morningstar, to select two US equity products for comparison: the AB Select US Equity Fund and the MFS Meridian US Value Fund.

Source: FE Fundinfo, Morningstar. (Data in US dollars, 11 January 2022)

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