Growth, Value and the Fed taper
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Growth stocks are falling behind more conservative Value stocks.
The Russell 1000 Growth ETF (IWF) has underperformed Value (IWD) since mid-February.
The initial divergence, in February 2021, was in reaction to a sharp increase in long-term Treasury yields.
The subsequent sideways pattern warns of another upward continuation. A sharp spike in reverse repo (RRP) by the Fed warns that the QE taper may be sooner than expected.
Conclusion
Adopt a defensive position: overweight Value and underweight Growth.
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Colin Twiggs is director of The Patient Investor Pty Ltd, an Authorised Representative (no. 1256439) of MoneySherpa Pty Limited which holds Australian Financial Services Licence No. 451289.
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