Growth Continues To Outperform Value As LT Yields Crater

• The combination of aggressive monetary and fiscal policies run by central banks and governments to finance to high costs of lockdown policies have led to growing concerns over inflation risks.
• In the past year, investors have been speculating that the constant positive surprises in inflation were going to lead to a 'Great Rotation' trade, where value stocks were going to significantly outperform growth stocks after a nearly a decade of underperformance.
• Even though the trade had been increasingly popular in the first few months of the year, the sudden rise in uncertainty has reversed the trend and growth stocks have started to outperform value stocks as global LT bond yields have been falling.
• The chart below shows that lower US bond yields have historically been associated with an outperformance of growth stocks over value stocks.

Source: Bloomberg/MNI