Citi analysts told investors in a research note on Tuesday that the value-to-growth rotation is likely to continue.

Low macro risk exposures and reasonable valuations are still conducive to growth performance going forward, they argue.

“Even as the volatility of the S&P 500 drops to the lowest level since late 2021, recent rotation from Value to Growth accelerated in May, and Value is now the worst-performing factor in 2023 YTD,” wrote the analysts.

“While S&P 500 was virtually flat for the month of May, Growth outperformed Value by the widest margin (18.7%) since early 2020. Valuations for Growth remain well below the recent peak reached in early 2020, and its macro exposure is also below the historical average.”

The analysts also believe that the potential Fed rate skip this month and cautious relative positioning in the equity market are tailwinds to growth performance as well.

As a result, Citi “continues to favor growth over value or low risk.”