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Mark Donovan, manager of Collins Stewart’s US Equities Focus fund, said current valuations of US equities were “excessively pessimistic”, assuming severe declines in corporate earnings.

Mr Donovan said value strategies had a history of outperforming growth in recessions and bear markets.

He said: “Value is a way to mitigate earnings risk and performs well when earnings are depressed, which is typical of a recession.

“Returns to value investing have traditionally doubled when valuation spreads are wide, as they are at present.”

He said value approaches could be particularly useful in the current environment, given recessions triggered by financial crises tend to be twice as long and severe.

“Without question, the US economy will continue to weaken as we move further into 2009,” he said.

“While more bad news concerning output and employment is inevitable, the market is already discounting most of it.”

Mr Donovan said as economies entered recession and spreads widened, growth strategies tended to have the edge over value strategies as investors paid more for a shrinking supply of companies maintaining growth.

However, as the recession became more pronounced and spreads compressed, value stocks outperformed, he added, as the stocks were less exposed to worsening fundamentals and earnings disappointments.

Mr Donovan said there was a compelling argument for US equities as free cash-flow yields on US equities seemed more attractive compared with bond yields, earnings quality continued to remain high and corporate balance sheets were strong and liquid.