Growth stocks and related exchange traded funds rebounded on Thursday as technology shares led gains.
The record-setting rally in U.S. markets paused this week after updated data revealed that inflation spiked to a 31-year high, suggesting that consumer prices will remain elevated for a period of time amid the ongoing global supply chain hurdles and lower employment participation rate.
Nevertheless, Arthur Hogan, chief market strategist at National Securities, argued that investors were able to look beyond the near term as “we just have more demand than supply,” Reuters reports.
“That’s likely a good thing for future growth in earnings,” Hogan added.
On Thursday, there were signs that investors were once again brushing off the inflation concerns as growth and technology stocks, which tend to perform poorly in an inflationary environment, rebounded.
“Going into the end of the year and early 2022, I definitely think the cyclical trade continues to show strength. I also really like small caps in this space, especially because of inflationary pressures,” Liz Young, head of investment strategy at SoFi, told Reuters.
Investors may have also seen the recent bad news as a good reason to engage in the age-old tradition of profit taking after the run-up in equity markets. Ryan Detrick, chief market strategist at LPL Financial, argued that Wednesday’s slide was a “well-deserved pullback” after an autumn stock market rally that pushed the S&P 500 to a stretch of repeated records, the Wall Street Journal reports.
“Economic growth is still quite solid, and that’s going to drive longer-term stock-market gains. We think the underlying fundamentals that got us here are still in place, and that’s what investors need to keep in mind,” Detrick added.
Investors interested in the growth style can turn to targeted strategies like the American Century Focused Dynamic Growth ETF (FDG). FDG is a high-conviction strategy that invests in early-stage, rapid-growth companies with a competitive advantage and 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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