Growth stocks and related exchange traded funds held on better than their value counterparts on Monday as investors prepped for the upcoming earnings season.
“Investors see the S&P 500 substantially off its all-time high and there’s no headline to scare them away from buying, so they’re buying like they usually do,” Mike Zigmont, head of research and trading at Harvest Volatility Management, told Reuters.
The third quarter earnings season will kick off this week with reports from JPMorgan Chase & Co on Wednesday and Bank of America Corp, Morgan Stanley, and Citigroup Inc. on Thursday. Goldman Sachs will share results on Friday.
Analysts anticipate a 29.6% year-over-year surge in profit for S&P 500 companies over the third quarter, according to IBES data from Refinitiv. However, expectations are coming down from the phenomenal 96.3% growth for the second quarter.
“At the beginning of the year, there was a consensus that inflation was going to be transitory, it’s harder to just keep saying that now as we’re still seeing supply chain log jams that have not eased up,” Max Gokhman, chief investment officer at AlphaTrAI, told Reuters.
“The margins are so stretched now for the companies there’s a realistic concern that companies will either not be able to beat their earnings expectations or will have to guide down for the next quarter,” Gokhman 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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