Growth-related exchange traded funds were off to a good start in the new year, despite rising COVID-19 cases that have previously weighed on sentiment.
U.S. markets have also typically strengthened at the start of a new calendar period, such as the beginning of a new year, as so-called new money from areas like pension funds invest when a new period starts.
“Today looks like a classic reopening,” LPL Financial market strategist Scott Brown told the Wall Street Journal.
Nevertheless, market participants remain cautions, especially with rising COVID-19 infections that could prolong supply chain disruptions and add further pressure on prices.
In addition, the Federal Reserve will be tapering its bond purchasing program and likely hike interest rates this year.
“It’s going to be a little bit bumpier than 2021. The three big questions that we ended the year with are still here: Omicron, inflation and supply chains, and the Fed,” Esty Dwek, chief investment officer at FlowBank, told the WSJ. “There’s definitely potential for outperformance for equity markets. I don’t think we’ll see 20% plus but we could see double-digits.”
Investors, though, have taken some solace in signs that the Omicron variant of the coronavirus is potentially less severe than earlier strains in some cases.
“There is certain optimism that we are seeing at the start of the year with a general sense that the Omicron variant won’t do quite the damage to the economy as the market initially thought it would,” Rick Meckler, partner at Cherry Lane Investments, told Reuters.
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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