The new year has brought a change in fortune for growth stocks, which have surged ahead of the value side of the market after facing brutal losses in 2022.
The Morningstar US Growth Index has risen 14.1% for the calendar year through Feb. 14, nearly 10 percentage points ahead of the Morningstar US Value Index, which is up 4.7% for the same period.
Growth stocks were left bloodied at the end of 2022, hammered by a year of aggressive interest-rate hikes from a near-zero starting point. Meanwhile, value stocks held up much better, a significant reversal of years of underperformance relative to growth.
However, growth stocks have been on a rally in recent weeks, as investors expect that the Federal Reserve may pause rate hikes soon.
Among growth stocks, large-cap companies have been leading the bounce: The Morningstar US Large Growth Index has risen 14.1% since the start of the year through Feb. 14. During the same period, the stocks of mid-size growth companies rose 12.0% and small-cap growth stocks gained 12.4% as a group.