Growth stocks could rally in the middle of 2023, according to Liberum which has based its prediction on the analysis of historic market trends.

Liberum analysts Joachim Klement and Susana Cruz have calculated the relative performance of growth as an investment style versus the wider UK stock market in all the recessions since 1980. The pair observe that since the summer of 2022 growth stocks have closely followed their trajectory in an average recession.

If the trend continues into 2023, the pair expect growth stocks to underperform in the first quarter before outperforming between April and September.

Value stocks are then expected to return to favour in the final three months of the year ‘as hard-hit deep value stocks start to rally in anticipation of an end to the recession’.

Klement and Crux note stocks deviated from the previous trend in the first half of 2022 thanks to the sell-off prompted by rising interest rates and the strength in energy prices.

Peel Hunt analysts Charles Hall and Clyde Lewis are less confident in a wider rebound in growth but feel there could be some exceptions which ‘are bettering their market positions through organic investment, new acquisitions or self-improvement’. They give the examples of Dr Martens (DOCS) and Wizz Air (WIZZ).

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