One year ago, in the September 2022 Market Minute, we highlighted the large valuation spread between growth and value stocks [see chart below]. At that point, the Federal Reserve (“Fed”) had hiked interest rates 4 times on the year from 0.25% to 2.5%. We forecasted that the higher interest rate environment intended to combat inflation would narrow the valuation spread between growth stocks (considered long duration assets that benefit from low interest rates) and value stocks. From August 31, 2022 to February 28, 2023, that is what happened. As the Fed continued to raise interest rates rapidly, going from 2.50% to 4.75% over a series of four rate increases, the S&P 500 Value Index did outperform the S&P 500 Growth Index by over 13% (7.9% vs -5.4%).

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