Undervalued Value Stocks in a Low-Interest-Rate World: A Strategic Reassessment

The global interest rate landscape in November 2025 is marked by a cautious easing of monetary policy, with central banks across major economies maintaining historically low rates. The U.S. Federal Reserve has reduced its benchmark rate to a range of 3.75% to 4%, while the European Central Bank (ECB) holds its rate at 2%. Meanwhile, the People's Bank of China (PBOC) has kept its one-year Loan Prime Rate (LPR) at 3.0%, underscoring a "moderately loose" stance amid slowing industrial output and weak retail sales, according to TradingEconomics data. These developments create a fertile ground for reevaluating undervalued value stocks, which have historically outperformed during periods of economic recalibration and shifting investor sentiment.

Historical Context: Value Stocks in Low-Rate Environments

The 2009–2015 period, defined by near-zero interest rates and aggressive quantitative easing, saw a prolonged underperformance of value stocks as investors flocked to growth equities with long-term cash flow potential, according to a J.P. Morgan overview. However, this narrative is not absolute. For instance, in 2018, as the Congressional Budget Office projected rising deficits and economic uncertainty, value stocks gained traction, according to a CBO projection. Similarly, during the 2015–2025 cycle, value stocks occasionally outperformed in sectors experiencing structural shifts, such as energy and industrials, where earnings visibility and cash flow generation became critical. These historical patterns suggest that while low rates generally favor growth stocks, value equities can thrive when macroeconomic risks temper growth expectations.

Investor Behavior and Market Dynamics

Retail investor behavior has evolved significantly over the past decade, with younger and lower-income demographics entering the market in unprecedented numbers, according to a J.P. Morgan Chase study. From 2023 to early 2025, retail investing flows surged by 50%, reflecting a broader democratization of wealth accumulation. This shift has amplified demand for stocks perceived as stable or undervalued, particularly in sectors like utilities, consumer staples, and financials. For example, the Bank of England's decision to hold rates at 4% in a closely divided vote, as reported in a Times report, has heightened sensitivity to yield-driven investments, a trait often associated with value stocks.

Moreover, the Federal Reserve's recent pause in rate cuts-despite market expectations of a 58% probability for another 25-basis-point reduction in the coming month, according to a Moomoo post-has created a climate of uncertainty. Investors are increasingly scrutinizing earnings resilience and balance sheet strength, traits that value stocks typically exhibit. This aligns with historical trends where value equities outperformed during periods of policy ambiguity, such as the 2018 market correction noted by the CBO projection.

Strategic Opportunities in the Current Environment

The current low-rate environment, coupled with central banks' cautious approach to tightening, presents opportunities for investors to capitalize on undervalued value stocks. For instance, the PBOC's decision to maintain its LPR at 3.0% despite weak economic indicators suggests a focus on selective stimulus, which could benefit sectors like infrastructure and manufacturing. Similarly, the ECB's exploration of a digital euro may spur demand for financial institutions with robust digital transformation frameworks, according to a Reuters report.

A visual representation of this dynamic is critical.

Conclusion: Rebalancing Portfolios for Resilience

While the low-interest-rate environment remains favorable for growth stocks, the current macroeconomic landscape-marked by central bank hesitancy and shifting retail investor preferences-creates a window for value equities to regain relevance. Investors should prioritize fundamentally strong, overlooked stocks in sectors poised to benefit from selective stimulus and digital transformation. By drawing lessons from historical cycles and adapting to evolving market dynamics, it is possible to construct a portfolio that balances growth potential with downside protection.