Growth stocks outperformed value stocks by a wide margin in the years leading up to the pandemic. Growth also outperformed value in the first ~18 months after the pandemic, but that trend has been flipped on its head since late 2021. You can see the recent convergence between growth and value in the chart below. Entering 2022, the S&P 500 Growth index was outperforming the S&P 500 Value index by ~40 percentage points since the pre-COVID high for the stock market in February 2020. Now, Growth is only outperforming Value by ~8 percentage points.

The shift from growth to value has been even more dramatic in the more economically sensitive small-cap space. Remarkably, the Russell 2,000 Growth index is now DOWN 6% on a total return basis since the pre-COVID peak for stocks on 2/19/20. Six months ago, this index was still up 45% from its pre-COVID high.

Fed Chair Powell first shifted to a tighter monetary stance in November 2021. In just six months since Powell’s pivot, we’ve seen the entire post-COVID bull market for small-caps give up its gains and then some. And this doesn’t even factor in a double-digit percentage point increase in inflation since COVID began that pushes “real” returns for the Russell 2,000 Growth index much deeper into negative territory.