In the last few days, the powerful rotation from growth stocks to value stocks, highlighted in our colleague Alex Harding’s article last week, continued.
Faster Growth, Slower Inflation
Rotation
Since the release of the Consumer Price Index (CPI) on July 11, the stock market has experienced a noticeable shift in leadership as the inflation rate continues to move toward the Fed’s target of 2%. Investors have been moving away from technology stocks, which have been the darlings of the market this year, towards small-cap and value stocks.
Manic Frustration
Over the last 18 months we have seen the tale of two markets. Looking at returns through June, large-cap growth stocks have driven returns resulting in the S&P 500 returning just under 17%. However, a slice of the market which is lagging meaningfully is dividend-paying stocks. Looking at a basket of dividend ETFs through June, returns are a paltry -2%.