Amid the carnage of one of the worst starts to a calendar year for share markets around the world, growth stocks have taken a ferocious beating.are those companies whose earnings are expected to be able to grow independently of the broader economy. The classic example is tech companies, where global reach of products and platforms can underwrite revenue and earnings growth even when economic growth is negligible.
In the US, the Russell 1000 growth index more than doubled the return of its value counterpart between the start of 2015 and November 2021.However, since late 2021, that has sharply reversed, with the growth index lagging the value index by about 40 per cent. Some of the highest-profile growth stocks that peaked during the COVID-19 lockdown period, such asAfter this shake-out, any smart investor who is remotely contrarian will sniff potential bargains.
Over the past 10 years, every time the growth stocks suffered a setback they quickly bounced back, conditioning investors to buy the dip. What might be different this time is the outlook for inflation. If inflationary pressures persist, that will continue to be a headwind for growth stocks.It’s frustrating to be told the arguments for persistent inflation are pretty equally stacked, but that’s the case.