Value investors deny that the market is efficient. In their view, stock prices are subject to irrational waves of optimism and pessimism. That’s mostly true. But just sometimes, the market’s mood isn’t too far off. A value trap appears when a falling share price correctly anticipates a company’s deteriorating fundamentals. Over the past year, some of America’s best investors have been misled into buying financial stocks by apparently cheap prices. The worst may not be over. If the economy goes into a deep recession, investors could face the greatest value trap since the Great Depression.

As a group, value investors have many attractive qualities. They are contrarian and stoical, knowing that successful investing requires long-suffering patience. They also have fewer illusions than most, modestly acknowledging that they can’t forecast the twists and turns of the economy. Instead, value investors adopt...