Value stocks trounce growth equities in 2022 by historically wide margin

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Value stocks have trounced growth equities in this year’s bear market as the Federal Reserve aggressively hiked interest rates to combat soaring inflation in the U.S. 

The Russell 1000 Value index

is beating the Russell 1000 Growth index

by around 20 percentage points this year, the largest margin of outperformance since 2000, according to Dow Jones Market Data.

Both indexes are down in 2022’s slumping U.S. stock market. The Russell 1000 Growth index has plunged around 30% this year, compared with a drop of around 10% for the Russell 1000 Value index, according to FactSet data, at last check. 

Growth stocks are particularly sensitive to rising interest rates. 

The “big question” is when the Fed might “pivot” and start cutting rates, said Eric Sterner, chief investment officer of Apollon Wealth Management, in a phone interview Friday. “It doesn’t seem like it’s going to happen next year, but it all depends upon how the economy reacts to all these rate hikes” and the course of inflation, he said. 

“Value tends to outperform during inflationary time periods,” said Sterner. “Growth sectors are most affected by the interest rate hikes, such as technology, and those are the sectors that have taken some of the largest losses in 2022.”

The Fed has been raising its policy interest rate to cool demand in the economy and curb high inflation.  

The U.S. stock market was down around midday Friday, sliding in its last trading session of the year. The S&P 500

was trading 0.8% lower, while the Dow Jones Industrial Average

fell 0.6% and the tech-heavy Nasdaq Composite

slid 0.9%, according to FactSet data, at last check. 

The blue-chip index Dow has dropped around 9% this year, while the S&P 500 has slumped almost 20% and the Nasdaq has tumbled more than 33%, FactSet data showed in midday trading. The S&P 500 is set to finish its worst year since 2008.

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