Growth Stocks on the Bargain Counter

Stocks off to worse start in 52 years - unparalleled buying opportunity?

Robert Zuccaro, CFA

The Nasdaq and Russell 2000 are having their worst year ever, and the S&P 500 index entered into bear market territory in mid-June, with a 24% decline from its all-time peak on January 3rd. The aggressive growth investment style has been especially hard hit this year following a superb run according to the Golden Eagle Strategies Aggressive Growth Fund Index (AGF Index)1 which shows a five-year annualized return of +31.3% through the end of 2021. Year to date, however, this index has declined 47% for its worst showing ever in any first half period, steeper even than in 2008 when the index fell 44.8%.

Most investors shy away from strategies having poor recent returns. However, point-to-point performance comparisons can often lead to false conclusions in making investment decisions. For example, the six-month performance of the AGF Index is the worst on record for any similar period in its 64-year history. However, consider the following:

1. Aggressive Growth Most Rewarding Investment Style.

History has proven that aggressive growth is the most rewarding investment style over the long term2. Notwithstanding the recent dismal showing of the AGF Index, it still shows a 100% advantage over the S&P 500 return since 1958. A $100 investment at the end of 1958 in the AGF Index would have grown to $90,144 as of the recent June 30th versus the same $100 investment growing to $44,580 in the S&P 500. Both gains are before taxes which would not be a consideration if invested in a tax exempt account. (Read More: Why Aggressive Growth Should Be Part of Every Portfolio).

2. Current Decline Nearing All-Time Lows Despite Solid Corporate Earnings.

It is important to put the steep decline of the AGF Index into perspective in order to understand the buying opportunity at hand. During the 2000-2003 bear market, the AGF Index declined 63% from peak to trough against the backdrop of a 31% decline in S&P 500 earnings in 2001. During the 2007-2008 bear market, the AGFI gave up 57% against the backdrop of a 40% decline in S&P 500 earnings in 2008.

Fast forward to the current environment in which the AGF Index has declined almost as much as in the two prior severe bear markets. At the moment, there is no damage to earnings as S&P 500 earnings were reported to be up 9% in the first quarter and are expected to show a 5% gain in the second quarter. We believe that any short fall in profits in the year ahead will be muted because many businesses have implemented price increases to not only protect margins, but also to expand them.

3. Investors Often Sell Low, Miss Recovery.

As mentioned, the Aggressive Growth Fund Index fell 44.8% in 2008, Many investors pulled their money out of their aggressive fund holdings in this dismal market thinking that they were reducing risk. They were mistaken. Instead, they were simply reducing the opportunity to get their money back. What some investors may not realize is that when you sell stocks at a profit, taxes must be paid on those profits. This means attrition of capital which never again can be used to build wealth. As each year goes by, lost opportunity costs continue to go up and up.

Investors selling their aggressive fund holdings in 2008 missed out on a 62% recovery off the bottom one year later and also missed out on a 208% return over the next five years. Investors sticking with their aggressive funds were rewarded with a 518% return over 10 years, coming off this bottom.

4. Aggressive Growth Still Best Bet Against Inflation.

The Fed intends to raise the discount rate up to 3.7% in 2023 which will be negligible in tamping down inflation in our view. The Fed took action in 1981 to raise the discount rate to a height of 14% to stem inflation. Only then was the back of inflation broken. The Fed appears very timid in its approach to dealing with inflation which means that high inflation is likely to remain with us for several years.

In looking back at the worst period of inflation in U.S. history during the 1970’s, the aggressive growth style proved to be the best hedge against inflation. Inflation spiked from 3.3% in 1972, rising to a peak of 12.5% by the end of 1980. During this period, inflation increased 95%. The aggressive growth investment style was the only style to outdistance inflation as evidenced by a gain of 130% during this inflationary period.


Investors tend to equate today’s headlines, which are bleak, with the direction of the stock market. History shows that the stock market starts to recover when the economic news is at its worst. Witness 2020 when the stock market started recovery on March 23rd – before the worst quarterly economic contraction in history in which second quarter real GDP plunged an unprecedented 31.7%. Economic conditions were far worse during the pandemic than today.

Like most other market recoveries, the stock market recovery will likely start sooner than most expect. We think that the worst of the stock market decline has been seen and that a bottom will occur before the year is out. We have little idea which way the next 10% move in the stock market will be, however, we are certain that the next 100% move will be up. Our outlook heading towards 2023 envisions a strong stock market recovery with aggressive growth funds leading the way as in all market recoveries since World War II.


To learn more about Golden Eagle Strategies and why we are a top performing aggressive growth fund, reach out to Brynne Zuccaro at

1 GES Aggressive Growth Index consists of 12 strategies consisting of top performing publicly traded aggressive growth funds (ETFs  and Mutual Funds) similar to investment objective of Golden Eagle Strategies. Additional details can be provided upon request. 2 As compared to other growth and value indexes based on Golden Eagle Investment Style Indexes which date back to 1958.

Golden Eagle Strategies, LLC (Formerly known as Target QR Strategies, LLC) is an investment adviser to private investment funds. This material is for general informational purposes only and does not constitute a solicitation or offer for any investment product or service. Certain information may be derived from third-party sources and is believed to be reliable, but its accuracy and completeness are not guaranteed. Opinions, estimates and projections constitute Golden Eagle Strategies’ judgment and are subject to change without notice. Past performance is no guarantee of future results and it should not be assumed that any investment or strategy will be profitable or will equal the performance of any example or illustration. Different strategies will have varying risks, potential for return, and costs which should be understood prior to investing. Investing involves risks and you may incur a profit or a loss. The investments or investment strategies discussed herein may not be suitable for every investor. CFA is a registered trademark owned by CFA Institute. Data shown is through the date listed on article

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