Growth, Value and the Fed taper

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Growth stocks are falling behind more conservative Value stocks.

The Russell 1000 Growth ETF (IWF) has underperformed Value (IWD) since mid-February.

Russell 1000 Growth (IWF) and Value (IWD)

The initial divergence, in February 2021, was in reaction to a sharp increase in long-term Treasury yields.

10-Year Treasury Yield & Inflation Breakeven

The subsequent sideways pattern warns of another upward continuation. A sharp spike in reverse repo (RRP) by the Fed warns that the QE taper may be sooner than expected.

Conclusion

Adopt a defensive position: overweight Value and underweight Growth.

Quote for the Week

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