U.S. markets strengthened Thursday after growth stocks and related exchange traded funds rallied on the economic recovery and brushed off the Federal Reserve’s hawkish monetary policy outlook.
Technology shares, which typically outperform during periods of low interest rates, fueled the rally in 2020 but was under pressure this year on fears of rising inflation that could trigger a sooner-than-expected rate hike. The central bank stated that it expects to raise benchmark rates in 2023.
“Yes there is rising inflation but the market is focusing more on the positives of improving earnings, robust GDP growth and the wider economy getting stronger,” Randy Frederick, vice president of trading and derivatives at Charles Schwab, told Reuters.
“Today’s action is indicative that the Fed hasn’t said anything that the market didn’t already know,” he added.
Meanwhile, economically sensitive stocks dipped as data revealed the jobless claims rising last week for the first time in more than a month. However, layoffs eased amid a reopening economy and a shortage of people going back to work.
“In the balance of June and into the summer we anticipate continued volatility as we get more signals from economic data, Fed policy and as we get into the earnings season,” Greg Bassuk, chief executive officer at AXS Investments, told Reuters.
Investors who are interested in the growth style can turn to strategies like the American Century Focused Dynamic Growth ETF (FDG), which is designed to invest in early-stage, high-growth companies. FDG is a high-conviction strategy designed to invest in early-stage, rapid growth companies with a competitive advantage, along with high profitability, growth, and scalability.
Additionally, investors can look to the American Century STOXX U.S. Quality Growth ETF (NYSEArca: QGRO). QGRO’s stock selection process is broken down into high-growth stocks based on sales, earnings, cash flow, and operating income, along with stable-growth stocks based on growth, profitability, and valuation metrics.
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