Last year, whenever the topic turned to growth versus value, it all boiled down to one key concept: interest rate directionality.

That direction: up. As yields rose, value stocks loved it. New life came to the investment style as investors reconsidered whether they should be paying premium multiples for “distant cash flow” stocks, i.e., growth.

The value cycle, should it continue to persist, appears to have a kickoff date of November 30, 2021. Since then, the bond market has sold off sharply, an action that was not taken kindly by the S&P 500 Growth Index. Through February 3, that Index’s total return is -19.5% since the value cycle’s birthday in late 2021, while the S&P 500 Value Index is in the black, up 8.4%. The S&P 500 itself is still down 6.6%, even after the multi-month rally that kicked off in October.

Though all of this has happened over about 13 months, it feels like forever ago when you remind yourself that the 10-Year Treasury yield was only 1.44% when value caught new life in late 2021. The spike in bond yields last year brought the T-note all the way to a peak of 4.24% just before Halloween 2022.

During that window of time—November 30, 2021 to October 24, 2022—the S&P 500 Value Index was off 4.2%, a moral victory when you consider the 25.5% clobbering in growth.

Here’s the fun part, at least for value investors: bonds have been rallying since October 24, yet growth has been unable to close the gap. In fact, the performance gap has widened even more. Through February 3, the S&P 500 Value Index has tacked on a gain of 14.8%, about five points more than the 9.5% run for the S&P 500 and more than 1,000 bps more than the 4.0% return posted by the S&P 500 Growth Index.

Rates up, value working. Rates down, value still working.

When everything is clicking for an investment strategy, what we are seeing with interest rate directionality is the type of thing that happens when a new cycle has taken hold. In the last cycle, the benefit of the doubt was given to growth stocks. We watched as growth crushed value through the big bull run from March 2009 to February 2020. Then COVID-19 came along, and the stock market crashed. What held up strongly in those six harrowing weeks of COVID-19’s first inning? Growth stocks.

It was tough for us and our investors; the dividend business was ice cold, unable to outperform in up or down markets.

But as markets evolve, so do the stories. You may recall a generation ago when gold was making its big commodities supercycle run. It didn’t matter much what the market threw at it; gold was going to go higher. It was around that time that people would say things like, “Gold likes inflation but also deflation.”

Because it did. In that specific cycle, gold did like inflation, and it liked deflation too. In a bull market, all news is good news.

We think we may be inside something like that with value relative to growth now. The growth cycle’s historic run started before the global financial crisis, lasting long enough for a baby born at its start to be halfway through high school by the time it ended on November 30, 2021.

Maybe it’s simply time for growth to sit in the corner. Interest rates up, interest rates down. It doesn’t matter because the growth cycle is over.