Growth ETFs Shake Off China Concerns as Investors Turn to Q3 Earnings

Growth stocks and related exchange traded funds climbed on Monday with technology companies taking charge as the third quarter earnings season helped fuel optimism.

While equities were weighed down by concerns over rising inflationary pressures and slowing economic growth in China due to an ongoing energy crunch, U.S. markets pushed higher on Monday with heavyweight tech names popping out.

“It feels like a little bit of FOMO (fear of missing out) is going on, mixed with this wall of cash on the sidelines,” John Augustine, chief investment officer at Huntington National Bank, told Reuters, noting that active managers were turning to stocks to position themselves for the fourth quarter and that “individuals are realizing that they’re not going to get a return for bonds or cash this year.”

Market sentiment took a hit early Monday after China revealed its slowest pace of economic growth in a year over the third quarter due to disruptions caused by power shortages and problems in the property sector, notably the Evergrande default risks.

Nevertheless, investors remained positive on the U.S. earnings outlook but maintained some level of caution on how corporate America will respond to the continued supply chain disruptions, labor shortages, and higher input costs, such as rising fuel prices.

“There is some weak data out of China, which is concerning on a global basis, and then market participants came into this earnings with a very pessimistic view but banks dramatically exceeded expectations,” Thomas Hayes, managing member at Great Hill Capital Llc, told Reuters.

Analysts anticipate that S&P 500 third quarter earnings will show a 32% increase year-over-year, according to Refinitiv data.

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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