The rise in inflation is compelling the Federal Reserve to act more aggressively this year. Goldman Sachs Group Inc. (GS) economist David Mericle stated that the omicron variant-induced price increases could push the Fed to raise rates faster. Inflation is currently running at its highest 12-month pace in nearly 40 years.
Amid the high inflation over the past year, growth stocks have underperformed value stocks. The SPDR Portfolio S&P 500 Value ETF’s (SPYV) 16% gains over the past year compare with the SPDR Portfolio S&P 500 Growth ETF’s (SPYG) 9.75% returns. This suggests a positive correlation between inflation and the performance of value stocks.
