2016 was the year of the value stock, but could some investors be wrong-footed in 2017?
Last, but by no means least, there is also the growing concern about increased inflation, which could benefit value stocks disproportionately.
Looking ahead, most of these factors appear set to continue to play a part in 2017; the market consensus certainly seems to think so.
December's BofA Merrill Lynch Global Fund Manager Survey, for instance, found 54% of respondents stated they believe the value rally will extend well into 2017, while only 13% think it is already over.
'Bullish' fund managers hike bank and Japan exposure
Individual managers operating in the value space certainly seem optimistic.
One long-term value manager I talked to, a dedicated follower of the Warren Buffett approach, said he is seeing more opportunities than in previous years and is growing increasingly confident the relatively unloved businesses in his portfolio will outperform.
Tony Dalwood, another veteran value investor and boss at Gresham House, said now is the time to be rotating into stocks that are intrinsically undervalued, rather than the momentum/quality focus of the past five years.
Nevertheless, there are some voices of caution. Andy Lapthorne at Société Générale is concerned the earnings upgrade story is limited to just a few super-cyclical sectors, together with slight improvements in banks and diversified financials.
Franz Weis, portfolio manager at Comgest, is concerned valuations for value stocks have overshot.
He accepts earnings growth is expected to accelerate sharply from -2% in 2016 to 18% in 2017 for European value stocks, which has fed through into a P/E rerating, but he observes value stocks now assume around 9% pa earnings growth for the period 2016-2018.
This growth is dependent on a number of factors such as a recovery in commodity prices, rising credit demand and a steady increase in interest rates.
With European value stocks now trading at 13.5x likely earnings, Weis argues they can hardly be described as a bargain. If value stocks really are such poor value, then maybe 2017 might prove to be one of those years most contrarians choose to forget.
David Stevenson is the Adventurous Investor columnist for the Weekend FT and a regular columnist at MoneyWeek. Click here to listen to his new bi-weekly podcast on Vox Markets.
