Growth vs Value Stocks: How Interest Rates Tilt the Race

Interest rates are one important driver of whether growth or value stocks come out ahead, not the only one. In 2022 the 10-year Treasury yield rose and the Russell 1000 Value Index beat the Russell 1000 Growth Index by 21.6 percentage points. Across 2020 to mid-2026, though, the direction of rates matched the winning style in only four of seven periods.

Key takeaways

A growth stock's value sits further in the future than a value stock's, so a rise in the discount rate cuts it more: $100 due in ten years loses about 25% of its present value when the rate goes from 2% to 5%, while $100 due in one year loses about 3%.
In 2022 the 10-year yield rose from 1.52% to 3.88% and the Russell 1000 Growth Index returned -29.14% against -7.54% for Value.
Calendar-year yield changes and the winning style agreed in 2020, 2022, 2025 and the first half of 2026, but not in 2021, 2023 or 2024.
In 2023 the 10-year yield ended the year exactly where it began, and growth still beat value by 31.2 points; in 2024 yields rose and growth led by 19.0 points.
The two indexes are built differently: at the end of 2025, the five largest holdings reached 40% of the Growth index, while the Value index needed 39.

How a rate change reprices cash

A share is a claim on a company's future cash, and its price reflects that cash discounted back to today. The discount rate is tied to what safe alternatives pay, so Treasury yields feed into it. A growth company, as the label is used here, is one whose cash is expected to arrive mostly later. A value company hands more of it over sooner.

Academic work backs the cash-flow timing difference itself. A 2023 Journal of Finance paper by Gormsen and Lazarus notes that value and several other factors invest in firms that earn most of their cash flows in the near future, and proposes that this timing explains their average premiums. The paper studies average returns, not how the two styles react when rates move. The arithmetic of timing can be shown with round numbers.

Illustrative example. The present value of a payment is its amount divided by one plus the discount rate, raised to the number of years until it arrives:

PV = CF / (1 + r)^t

CF = cash payment ($100 here)
r  = annual discount rate
t  = years until the cash arrives

Payment	PV at 2%	PV at 5%	Change
$100 due in 1 year (value-like)	$98.04	$95.24	-2.9%
$100 due in 10 years (growth-like)	$82.03	$61.39	-25.2%

Same rate move, nearly nine times the damage to the far-off payment. Real companies sit between these two extremes, and growth companies can also raise their forecasts, so the example shows the direction of the effect and not its size for any actual stock. Because expected inflation also tends to lift a company's future cash in dollar terms, the rate that matters is better thought of as the inflation-adjusted one: the Treasury's 10-year inflation-indexed yield (FRED series DFII10) strips out expected inflation, while the ordinary 10-year yield (DGS10) does not.

The 2022 test case

The Federal Reserve raised its target range to 1/4 to 1/2 percent on March 16, 2022 and, by its December 14 meeting, had it at 4-1/4 to 4-1/2 percent. Over the calendar year the 10-year yield (DGS10) went from 1.52% on December 31, 2021 to 3.88% on December 30, 2022, with a highest daily reading of 4.25% on October 24. The inflation-indexed yield (DFII10) moved from -1.04% to 1.58%, a rise of 2.62 points.

FTSE Russell's Growth and Value performance quilt (data as of June 30, 2026) lists the Russell 1000 Value Index at -7.54% for 2022, the best of all the style indexes it tracks that year, and the Russell 1000 Growth Index at -29.14%, the worst. The gap is 21.6 points. Both figures are index returns, which cannot be invested in directly.

Saying the yield "doubled" in 2022 understates the move: 3.88 divided by 1.52 is about 2.55 times. Nor did 2022 settle the longer contest. Compounding the quilt's calendar-year returns for 2022 through 2025 gives about +59.9% for Growth and +36.6% for Value, because the later years favored growth (see the table below).

Seven periods, one rate lens

To test the idea beyond 2022, the table compares the change in the 10-year yields over each period with the Russell 1000 index returns from the same quilt. Yield changes use the last available daily value of each year; 2026 runs to June 30, the quilt's cutoff. The last column asks a narrow question: did the rate direction point to the style that won?

Period	10-year yield change (points)	Inflation-indexed yield change (points)	Growth return	Value return	Winner	Direction fits?
2020	-0.99	-1.21	38.49%	2.80%	Growth by 35.7	Yes
2021	+0.59	+0.02	27.60%	25.16%	Growth by 2.4	No (small gap)
2022	+2.36	+2.62	-29.14%	-7.54%	Value by 21.6	Yes
2023	0.00	+0.14	42.68%	11.46%	Growth by 31.2	No
2024	+0.70	+0.52	33.36%	14.37%	Growth by 19.0	No
2025	-0.40	-0.31	18.56%	15.91%	Growth by 2.7	Yes (small gap)
2026 to June 30	+0.26	+0.27	5.33%	16.26%	Value by 10.9	Yes

Three points stand out. First, the size of the yield move says little about the size of the gap. Of the four periods with moves under 0.6 points, two had gaps under three points (2021 and 2025), while flat-yield 2023 had a 31.2-point gap and early 2026 a 10.9-point one. A year with no yield change has no direction to test, so 2023 can be read as a miss or set aside; either way, growth's lead that year came from something other than rates.

Second, the two biggest growth margins outside 2020, in 2023 and 2024, came with flat and rising yields. Third, using the inflation-indexed yield instead of the 10-year gives the same result: the direction fits in 2020, 2022, 2025 and the first half of 2026, and in no other period. Counting four fits in seven periods is a description of this sample, not a hit rate that anyone can expect to repeat. Calendar-year endpoints also hide what happens in between: the 10-year yield ran from 3.30% on April 5, 2023 to 4.98% on October 19, 2023 and was back at 3.88% by year-end.

Where the rate link broke

Rates are only one force acting on the two indexes. Another, which the index factsheets do document, is how differently the two are built. FTSE Russell's January 2026 factsheets, with data as of December 30, 2025, give the figures. In the Russell 1000 Growth factsheet, the largest single stock carries a capped weight of 12.224%, the five largest holdings reach 40% of the index, and it holds 391 securities. In the Russell 1000 Value factsheet, the largest stock is 3.100%, it takes 39 securities to reach 40%, and there are 870 constituents.

An index in which five stocks are 40% of the weight can move with the fortunes of a few companies, whatever the Treasury market does. The factsheets show the 2025 structure and do not say what caused returns in 2023 or 2024, so the cause of those years' gaps is outside what this data can establish. What the numbers do show is that a rate-only reading would have pointed the wrong way in both years.

The same factsheets list annual dividend yields of 0.5126 for Growth and 1.8755 for Value (no unit is given; read as percentages, about 0.5% and 1.9%), which fits the "cash sooner" description of value. A higher dividend yield is not the same as shorter duration, though; some value companies are cheap because their earnings are shrinking. Dividends also do not decide index membership: FTSE Russell sorts stocks into growth and value using book-to-price, I/B/E/S two-year forecast earnings growth and five-year historical sales-per-share growth.

Frequently asked questions

Which yield matters more, the 10-year Treasury or the inflation-indexed one?

In theory the inflation-adjusted yield is closer to the discount rate, since expected inflation also raises the cash flows being discounted. In 2022 the two cannot be separated: the 10-year yield rose 2.36 points and the inflation-indexed yield rose 2.62. In 2021 they diverged, with the 10-year up 0.59 and the inflation-indexed yield up 0.02.

Does the Fed's rate decision set the 10-year yield?

Not one for one. Between March 16 and December 14, 2022, the midpoint of the Fed's target range went from 0.375% to 4.375%, a rise of 4.00 points, while the 10-year yield went from 2.19% to 3.49%, a rise of 1.30 points. The 10-year yield largely reflects market expectations of the path of short-term rates over the next decade, plus extra compensation for holding a long bond, not only the current policy rate.

Why are the index returns different from what a fund would have delivered?

FTSE Russell states that indexes cannot be invested in directly and that index returns may not represent the results of actual trading. A fund that tracks a style index also charges fees and holds cash, so its return will differ from the index. The comparison in this guide is of the indexes themselves.

Did growth ever lose to value in a year when yields fell?

Not in this sample. Yields fell in 2020 and 2025, and growth led in both, by 35.7 and 2.7 points. The sample has only two such years, so it does not show that growth always wins when yields fall.

Where can the yield data be checked directly?

The Federal Reserve Board publishes the constant-maturity series in its H.15 release, and FRED carries them as daily series, DGS10 for the nominal 10-year and DFII10 for the inflation-indexed one. Index returns come from FTSE Russell's performance quilt and factsheets. Note that FRED shows no value on days when the bond market is closed.

Checking the rate story yourself

Pick the period and take the 10-year yield (DGS10) at its start and end dates, then do the same for the inflation-indexed yield (DFII10).
Take the Russell 1000 Growth and Value returns for the same dates and subtract one from the other.
Don't read the size of the yield move as the size of the gap: in this sample the flat year, 2023, brought a 31.2-point growth lead, and a 0.26-point rise in early 2026 came with a 10.9-point value lead.
Check the index weights: how many stocks make up the first 40% of each index, and which sector they sit in.
Check intra-year swings as well as the endpoints, since a flat year can hide a 1.7-point move.