Is It Time for Growth to Catch Up?

Feb 3, 2023

A Change in Trend

For the past two weeks, we have been observing the S&P 500 reverse its downward trend.

The newly formed uptrend is starting to look more aggressive as investors may be worried about missing out on the rebound in US stocks.


Current Market Leadership

Taking a look at where the strength has been over the past two weeks, we can see that growth stocks are starting to play catch up to their value counterparts.

We are also seeing higher beta areas of the market, such as technology stocks and small/mid-cap stocks outperform. This is possibly confirming the idea of FOMO (Fear of Missing Out).

Investors may be looking at these areas to help them “catch up” to the market, especially if they are still sitting on the sidelines in cash.


Sector leadership has dramatically changed over the past few weeks as well. Last year’s winners are this year’s losers and vice-versa.

Consumer discretionary names have been leading the market higher – an interesting change in leadership, as discretionary tend to outperform when consumers are feeling good about the economy and future job prospects.

Time for Growth to Catch Up?

Value names have been leading the market higher since the market lows this past fall. Taking a look at S&P 500 Value, we note how this area of the market has already recaptured its previous highs:

Meanwhile, growth stocks look like they are just beginning to venture higher – but they are nowhere near their previous highs.

The market may possibly be looking towards growth names for opportunities in the market as value has already had an impressive move upwards.

This move higher by growth stocks is being confirmed by the relative strength relationship between the S&P 500 index and the Discretionary, Technology, and Communication sectors:

While there seems to be a shift toward growth stocks, US equities are a bit overextended at their current levels. Keep an eye on how the market reacts to pullbacks. Will we see an aggressive buy of any dips in the market, or will investors take profits and move to the sidelines? Continued buying of the dips is a good indication that FOMO is still present in the market – which could potentially drive the market much higher as emotions (greed) take over investors’ reasons to buy.


By John Rothe, CMT

Founder & Chief Investment Officer

Riverbend Investment Management

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