Rate regime recovery

Question: How do growth stocks typically perform toward the end of a tightening cycle?

Jordan Stuart: Towards the end of a Fed tightening cycle, if the Fed gets what they want, which is lower rates, lower growth, growth stocks tend to outperform in that environment. We think that in a lower rate, lower growth environment, that companies that can create their own offense, that create their own growth in the secular trends, don't need the economy to boost them or rates to boost their earnings. Those companies, we believe, were sold off the most last year and should recover this year in a different rate regime. I think the market has priced in further tightening throughout the year, especially in growth stocks. Growth stocks on a relative basis versus their value peers have underperformed at record levels. Growth companies typically don't care what the interest rates are doing or what oil prices, where they're going. We think that these stocks that were down anywhere from 20 to 30% last year have reflected this new rate regime, but if that comes to an end, you should see these stocks start to do well next year.