By Sam Boughedda
UBS analyst David Lefkowitz downgraded the firm's view on growth from neutral to least preferred while maintaining their most preferred view on value.
In a note released Friday, the analyst said that while growth stocks have underperformed this year, they think there is more to go.
"Relative valuations remain lofty. Higher interest rates, strong economic and earnings growth, as well as high (but falling) inflation should support further value outperformance," said the analyst.
Lefkowitz confirmed that they are neutral across size segments.
"Today's flatter yield curve - the difference in yields on 10-year and 2-year Treasuries - suggests the business cycle is more mature, and it will likely be challenging for small- and mid-caps to outperform," added Lefkowitz.
"Still, earnings growth remains solid and relative valuations for smaller companies are very attractive. Taking today's relative valuations into account, smaller size segments should outperform over longer-term time horizons."