Growth stocks and related exchange traded funds are back in the mix Wednesday as traders waited on the release of the Federal Reserve’s latest minutes.
“It is really the tech space that’s been driving the market,” Esty Dwek, head of global market strategy at Natixis Investment Solutions, told the Wall Street Journal. “Over the next few weeks and months, hopefully we’ll see that U.S. growth is holding up well, that will continue to support markets.”
The major indices have been breaking into new record highs on signs of a recovering economy and hopes that the Federal Reserve won’t roll back its accommodative policies in the short-term. Meanwhile, government bond yields have also dipped back to their lowest level in over fourth months, further adding to the risk-on sentiment.
“Some of the old leaders are becoming the new leaders again after a disappointing first quarter for the growth names,” Mark Heppenstall, chief investment officer at Penn Mutual Asset Management, told Bloomberg. “It makes more sense you’ll see more emphasis on growth names in a world where people think we’ve hit peak growth and maybe we’re in a Goldilocks inflation environment.”
Investors are now waiting on the Federal Reserve’s minutes from its June meeting, which will help reveal when policymakers are thinking about adjusting the bond-buying programs.
The meeting notes “may not be as hawkish as people expect,” Dwek added. “They have shown us that they are not asleep at the wheel and they are keeping an eye on inflation, but they still expect it to be transitory.”
Investors who are interested in the growth style can turn to targeted 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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