Value and growth investing have historically led markets during different economic conditions. This report examines how inflation, interest rates, and broader market regimes have influenced the relative performance of value and growth equities over time.
Using historical comparisons across periods including the 1970s stagflation era, post-recession recoveries, the technology expansion of the 1990s, the post-dot-com period, the Global Financial Crisis, the low-rate environment of the 2010s, and recent market conditions, the report illustrates that leadership between value and growth has rotated rather than remaining constant.
According to the report, growth-oriented equities historically performed more strongly during periods characterized by low interest rates, quantitative easing, and strong expectations for future earnings growth. The report attributes this to lower discount rates increasing the present value of longer-duration cash flows. By contrast, value-oriented equities historically performed more favourably during periods of inflation, rising rates, and post-bubble recoveries, where valuation compression places greater emphasis on nearer-term cash flows and earnings.
The report highlights the 2022 rate shock as an example of how rapidly changing discount rates can affect style performance differently, noting that Russell 1000 Growth declined more than Russell 1000 Value during that calendar year. It also notes that the 2010–2019 period represented value’s weakest relative decade within the historical comparison presented, during a period associated in the report with low rates and abundant liquidity.
Rather than positioning either style as superior, the report frames value and growth as cyclical exposures whose relative performance has historically shifted with changing macroeconomic conditions and market regimes. Topics covered include value investing, growth investing, equity style cycles, inflation, interest rates, and portfolio construction.