SHARES of growth businesses are having another good year on the stock market. It is now 10 years since value shares hit a relative peak, lagging growth since the Great Financial Crisis.

Should investors bet on a reversal? Whether the stock market will rotate back to favour value may depend a lot on prospects for global inflation and interest rates.

Value is a label that bundles together companies that have lower market valuations relative to either assets or profits. This may allow these businesses to distribute higher dividends, but they are often also driven more by the vagaries of economic cycles. Typically, they have less scope for increasing their profit margins.

Value should do well in a growing global economy, as we have now, but there are headwinds that have made the current environment unusually tough.

Continued disruption by new entrants applying innovative business models has chipped away at big value businesses. In a global environment of weak real growth in wages and productivity, it is hard to hold prices, never mind raise them.

In the past, an economic upturn would have driven up inflation, benefiting cyclical and commodity businesses with easy price rises. Now inflation is low around the world, despite central banks printing money.

Even with UK inflation picking-up after last year’s devaluation, price rises are patchy and wage growth is lagging. Previous disinflationary forces could reassert if the pound stabilises, as it has in recent months. The Bank of England is only talking about limited interest rate rises, recognising that many sectors are cooling after the Brexit vote.

By comparison, British growth businesses have been extraordinarily strong for this quarter to date. In a world of subdued growth, companies that operate in growing sectors or niches are prized. Many of these businesses have greater control over their own destiny and pricing, and are less subject to the vagaries of global competition and technology.

Investors have noted, for example, that the veterinary sector appears to have more positive characteristics than big pharma – growing, but without the same levels of regulation and price control. The companies that can exploit these pockets of growth tend to be smaller or medium-sized.

Valuing growth businesses can be subjective – with so much of their profits and dividends lying in the future, changes in forecasts or interest rates matter a lot. With typically lower dividend pay-outs today, as they reinvest, these businesses rely on investor confidence in what lies ahead.

As a result, share prices of growth companies can be more volatile. Rising interest rates in the UK, EU and US could increase the risks.

Higher interest rates could help one group of value stocks – the banks. But these face disruption from new challenger banks and still have problems with their business models.

Instead, among value businesses, it could be the time for commodities to perform better.

Prices of base metals and oil appear to have stabilised, and many businesses have restructured to cope with current conditions. Even the major oil companies have cut costs, recognising that the oil price could stay at around $50 for a long time.

Whether institutional investors move their money from growth to value will depend on the risk of an economic downturn or growth so strong that interest rates rise sharply. Any move away from the current comfortable environment of growth with subdued inflation could make value look more attractive, but there may be parts of the value category that still miss out if investors fear disruption.

Growth has enjoyed an unusually long winning streak, just as the lengthy economic cycle has confounded history. The global economy is being driven by some unusual factors that may not persist.

It may be time for investors to reassess the balance of growth and value in their portfolios.

Colin McLean is managing director at SVM Asset Management.