September 26, 2025
We’re going to keep it brief this week. Moderating economic data, investor enthusiasm for AI and AI infrastructure plays and a supportive Federal Reserve have kept tailwinds behind Growth stocks.
Large/Mega Growth vs. Value
The Value trade is likely to continue to struggle while interest rates are trending lower. Since the last whiff of inflationary pressure in January of 2025, the US 10yr Treasury Yield (chart below) has been in a downtrend which has coincided with underperformance in Value stocks. Despite a lack of inflationary signal, we think the direction of rates remains an important indicator for Growth vs. Value. Lower rates decrease cost of capital and boost the notional present value of future cash flows. Lower rates also provide tailwinds to acquisitions, private equity borrowing, buybacks and other dynamics that favor concept stocks over commoditized earners.
US 10yr Yield
Conclusion
Investors should be looking for signal from upwards moves in commodities prices and government rates for indications of stronger upside activity. At present the tailwinds are with the Growth trade, but a higher cost environment would likely favor Value stocks on a marginal basis.
