When US President Donald Trump surprised markets with aggressive tariffs against scores of countries, funds focused on large-company growth stocks took a big hit and value strategies proved more resilient. More recently, large growth funds have recovered, and they’ve been the best-performing corner of the Morningstar Style Box since April 3. With the rebound, these funds regained their seat as the long-term performance leader, with value strategies falling behind.
Large-cap growth funds have fallen 0.8% on average since the tariffs were announced, through April 25. That compares with a 2.6% decline in the Morningstar US Market Index since Trump unleashed his trade wars.
Large growth funds have performed more than a percentage point above the second-place category, mid-cap growth funds, which are down an average of 2%. Small-cap value funds have fared the worst, down 6.1% on average since April 3. Within the large growth category, 54 out of the 310 funds with assets over $100 million are in positive territory for this time frame. For comparison, none of the 329 large value funds are up since April 3.
Growth Funds’ Tariff Stumble and Rebound
In the immediate aftermath of Trump’s harsher-than-expected tariff announcement, growth stocks led the stock market’s declines. That was partly because some of the biggest names were seen as being in the crosshairs of tariffs, most notably Apple AAPL. In addition, Tesla TSLA stock took a beating, as data showed buyers shunning its electric vehicles in response to Elon Musk’s role in federal budget cuts. From April 3 to 8, the large-cap growth category fell 12.2% on average, compared with 11.5% for large-value funds. Meanwhile, investors continued a rotation into value and other defensive stocks that had begun late in 2024.
However, when stocks rebounded on April 9, thanks to Trump announcing a 90-day pause on some tariffs, large-cap growth funds began a bounce that accelerated in late April. Since then, these funds have gained 13%, compared with just 7.8% for large-cap value funds.
Netflix NFLX has been the biggest contributor to the category’s returns since the tariff announcement, contributing 0.4 points of the category’s outperformance over the US Market Index, according to data from Morningstar Direct. Next was technology firm Broadcom AVGO, which contributed 0.4 points, followed by Microsoft MSFT and Eli Lilly LLY, each of which contributed 0.2 points.
How Large Growth Funds Have Performed
The active large-cap growth fund with the most assets, the $277 billion American Funds Growth Fund of America RGAGX, is down 1.9% since the trade wars began, while the largest active large-cap value fund, the $114 billion Dodge and Cox Stock Fund DOXGX, is down 5.5%.
The best-performing active large-cap growth fund, the $3.7 billion Morgan Stanley Institutional Growth Fund MGRPX, is up 3.2%, while the best-performing active large-cap value fund with more than $100 million in assets, the $418 million ETC 6 Meridian Mega Cap Equity ETF SIXA, is down 1.3% since April 3.
Meanwhile, the biggest large-cap growth index fund, $298 billion Invesco QQQ Trust QQQ, is down 0.8% since April 3, while the largest large-cap value index fund, the $191 billion Vanguard Value ETF VTV, is down 4.9%. The best-performing large-cap growth index fund, the $377 million VictoryShares Free Cash Flow Growth ETF GFLW, is up 2%, while the best-performing large-cap value index fund, the $109 million VictoryShares US Multi-Factor Minimum Volatility ETF VSMV, is down 2.4%.
Large Growth’s Long-Term Outperformance
The rebound brings the category back to the top of the US diversified stock fund podium. These funds have dominated the other style boxes over the past one-, three-, and 10-year trailing periods, the only one to manage double digit returns over each of those periods.
The one exception to large growth’s dominance is seen in five-year trailing returns. Over that period, large growth’s 14.1% annualized return put it behind multiple other categories, with small-cap value managing 15.8%. The trailing five-year period is the only time during which small-cap value shines, while it lands near the bottom over the one-, three-, and 10-year trailing periods.
