Growth stocks and related exchange traded funds continued to outperform after Federal Reserve Chairman Jerome Powell reassured investors that inflation is temporary and that the central bank will maintain its monetary policies.
Powell told members of Congress that U.S. monetary policy will provide “powerful support” to the economy “until the recovery is complete,” arguing that a recent spike in inflation was temporary and urging on the need for continued job gains, Reuters reports.
“Markets have been in a bit of a tug of war between concerns about high inflation and concerns about pulling back of monetary policy,” Randy Frederick, vice president of trading and derivatives at Charles Schwab, told Reuters. “And as Powell continues to say he’s not going to hike rates, then the market continues to perform well.”
Meanwhile, the earnings season is moving into full swing. Analysts project 66% profit growth for S&P 500 companies over the second quarter, compared to a 30.6% plunge for the same period last year, according to IBES estimate data from Refinitiv.
“Second-quarter earnings season will be very much like the first quarter, in that expectations will meet or exceed street forecast for the most part,” Eric Marshall, portfolio manager & head of research at Hodges Capital Management, told Reuters.
Investors who believe the inflation spike is temporary and 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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