Latest / Bull Market Conversations with Fexingo: Rallies, Momentum, and Riding Market Strength / Why Growth Stocks Are Leaving Value Behind in July 2026
Transcript
- Lucas: Luna, I keep coming back to one number this week — the Russell 2000 dropped one point one percent over the past five days. Meanwhile, the S&P 500 is up half a percent, the Nasdaq is up six tenths. That gap is getting hard to ignore. Luna: It's not just small caps lagging, either. The growth ETFs are doing fine — IWF is up eight tenths — but ARKK, the flagship disruptive innovation fund, is down four percent in the same window. Lucas: Exactly. The market is carving out a very specific kind of growth. Not 'disruption for disruption's sake' — growth that comes with a clear bill of health. Let's look at two names that tell the story: Cloudflare and CrowdStrike. Luna: Cloudflare up eight point four percent in five days. CrowdStrike down six point one. Both cybersecurity, both high-growth, but the market is treating them very differently. Lucas: Right. Cloudflare's rally has been tied to their AI edge-computing narrative — they're selling infrastructure that directly supports inference workloads. CrowdStrike had a security incident last quarter that shook confidence, and the stock hasn't recovered. Same sector, totally different trajectories. Luna: So the market is rewarding companies that can show AI revenue, not just AI plans. That's been a theme for a while, but the divergence is getting sharper. Lucas: It's accelerating. Look at the Fed — the effective funds rate is flat at three point six three percent. No tailwind from rate cuts. So investors are getting picky. They want earnings per share growth that's real and visible. Luna: And value stocks? They're not delivering that right now. The Dow is down nearly a percent over five days, and that's your blue-chip value index. Old economy, slow growth. Lucas: Yeah, the Dow at fifty-two thousand six hundred is still high by historical standards, but the momentum is clearly with growth. And not just any growth — the high-beta, high-conviction names. The Russell two thousand, which is more value-tilted, is getting left behind. Luna: So how should an investor think about this? Do you just load up on IWF or VUG and call it a day? Lucas: I think you have to be more surgical. The growth ETFs are fine, but within them there's a lot of dispersion. Datadog is up eight tenths — solid but not spectacular. Shopify up two percent. But Cloudflare up eight percent? That's a bet on a specific thesis. Luna: And Palantir is down four point three percent over the same period. That stock had a huge run earlier this year on AI hype, but now the market is asking for proof. Lucas: Right. Palantir is a good example of the shift. It went from 'AI story' to 'show me the commercial revenue.' They're making progress, but the market is impatient. Meanwhile, Cloudflare is signing contracts with actual logos. Luna: This feels like a moment where factor investing gets really granular. It's not just 'growth versus value' — it's 'growth with earnings momentum versus growth with narrative momentum.' Lucas: That's a great way to put it. And the data backs it up. The S&P 500 forward price to earnings ratio is around twenty-two, which is above the long-term average. But if you strip out the top ten names, it's closer to eighteen. So the broad market isn't crazy expensive — but the leaders are. Luna: Which makes the divergence even more interesting. The market is saying 'we'll pay up for growth, but only if you can prove you'll deliver.' Lucas: Exactly. And this is where a lot of active managers are struggling. If you just buy the index, you're fine. But if you're trying to pick individual names, you have to be right not just on the sector, but on the execution timeline. Luna: One interesting data point: nominal GDP is up to thirty-one point eight six trillion, and real GDP growth annualised is two point one percent. That's not a booming economy — it's steady. So the growth we're seeing in tech stocks is coming from market share shifts, not a rising tide. Lucas: That's the key. The tide isn't lifting all boats. The Russell is down. The Dow is down. ARKK is down. The winners are very specific. And I think that's the bull market we're in right now — narrow, deep, and unforgiving if you bet on the wrong name. Luna: So for listeners who are thinking about their portfolio — do you lean into the growth trade, or do you start looking for value that might catch up? Lucas: I think you have to ask: what's the catalyst for value? Higher rates are off the table — the Fed is flat. Economic growth is okay but not accelerating. So what would make someone buy a slow-growing company today? It's hard to see a trigger. Luna: Unless you believe the AI theme broadens out. Some people argue that AI productivity gains will eventually benefit old-economy companies too. Lucas: That's a longer-term argument. But right now, July 2026, the market is voting with its wallet. Growth is winning, and within growth, the winners are the ones with actual AI revenue. Not stories, not plans — revenue. Luna: And speaking of the show — if our money conversations have helped you think about a decision differently, we're listener-funded. A small group of listeners already chips in monthly at buy me a coffee dot com slash fexingo, and that's what keeps these episodes ad-free and independent. Lucas: Yeah, it's a straightforward model. No ads, no sponsors, just people who find value in the conversation. It's not for everyone, but it works for us. Luna: Absolutely. So back to the divergence — what about the Fed task force Kevin Warsh announced? He's bringing in Marc Andreessen and Doug McMillon. That could signal a shift in how the Fed thinks about innovation. Lucas: That's a fascinating angle. Andreessen is a venture capitalist who has been vocal about AI and crypto. McMillon runs Walmart, which is a traditional business adopting tech. So the task force has one foot in the future and one in the present. It might influence how the Fed views productivity gains from AI. Luna: If the Fed starts acknowledging ai driven productivity growth, that could change their rate path. Higher productivity means higher potential growth without inflation. That would be a tailwind for growth stocks. Lucas: Exactly. And that's the kind of structural shift that makes the current growth-value spread sustainable. It's not just momentum — it's a fundamental repricing of what growth is worth in a world where AI is real. Luna: So the bull market is still on, but it's a thinking person's bull market. You can't just buy the dip and hope. Lucas: Right. And if you're not sure where to put your money, the data says: stick with the names that have earnings momentum and a clear AI narrative. The rest will have to wait for their turn.