- The US stock market is currently trading at a 5% discount to a composite of fair valuations as of May 29, 2026.
- Growth and value categories are trading at similar discounts to fair value, with growth stocks at a 5% discount and value stocks at a 6% discount.
- From March 31 to May 29, the growth category has significantly outperformed, rising 21.26% compared to the 3.52% increase in value stocks.
- During this period, AI stocks were a major driver, making up nine of the top 10 contributors to market returns and accounting for two-thirds of the total market return.
- The technology sector has emerged as the fastest-growing sector, with a rise of 35.78% over the same timeframe.
- As of now, the growth category has shown improvement from earlier this year when it was trading at a 19% discount to fair value.
- Analysts have indicated that during market rallies, undervalued technology stocks, particularly AI stocks, are expected to outperform significantly.
- However, emerging risks have been noted, which could lead to increased volatility compared to last year.
- In turbulent times, the market is likely to rotate out of growth and into value stocks, as seen earlier this year.
The US equity market has been trading at a 5% discount to fair valuations, reflecting a significant shift as both growth and value categories approach parity. Between March 31 and May 29, the technology sector surged by 35.78%, with AI stocks driving two-thirds of the total market return.1245
This period saw the growth category reducing its discount to fair value from 19% to just 5%. In contrast, value stocks lagged behind, gaining only 3.52%. Analysts note that during market rallies, AI and undervalued technology stocks are expected to meaningfully outperform, while potential market stresses may prompt a rotation to value stocks.367
However, experts caution that emerging risks could introduce volatility akin to last year's fluctuations, emphasizing the need for strategic investment approaches.8
Overall, the outlook hints at a more balanced market as investors navigate between growth and value opportunities.
“The US stock market is currently trading at a 5% discount to fair valuations, reflecting a shift towards a balance of growth and value stocks. The technology sector has been particularly strong, with AI stocks contributing significantly to market returns.”
