"Even though the returns of the value factor (price-to-book ratio) are usually positive, there are periods when investors prefer growth stocks, such as during the internet bubble in the late 1990s and from August to December 2007.

As *The Economist* put it, the reason growth stocks regained market favor in 2007 was simply that the premium for investing in value stocks had significantly diminished. Another reason was that the U.S. economy had slowed down, so investors increasingly wanted to invest in companies that could still generate sustained earnings growth, rather than those that would be harmed by an economic downturn."

Similarities to the present:
1. Growth stocks are extremely outperforming value stocks — the Mag 7 (now AI concept stocks) are absorbing almost all capital inflows, while low-valuation traditional industry stocks are being abandoned by the market. This is exactly the same logic as the "only buy .com" mentality during the internet bubble of the late 1990s.
2. Expectations of an economic slowdown — Investors rationally flock to "certainty growth" (the AI narrative = the new vehicle for certainty growth) under the expectation of an economic slowdown, abandoning cyclical value stocks. This is completely consistent with the logic of late 2007.
3. The value premium has been compressed to extremely low levels — The valuation spread between growth and value is at historically extreme levels, similar to March 2000 and late 2020.