Growth stocks and related exchange traded funds continued to advance on Tuesday as major U.S. benchmarks were on track for another new record with a strong earnings season backing the momentum.
Third-quarter earnings have so far been better than expected for U.S. companies as the economy continues to recover from the coronavirus pandemic, Reuters reports. About 320 S&P 500 companies have reported so far, and earnings are expected to jump 40.2% over the third quarter year-over-year, according to Refinitiv IBES data.
“From a fundamental perspective, there is a strong underpinning for the performance of the broad equity market complex,” Bill Northey, senior investment director at U.S. Bank Wealth Management, told Reuters. “The next several days and weeks will include significant developments on the policy front, and we are watching that very closely because as we transition out of the earnings reporting season many of the macro factors will start to take center stage again.”
Looking ahead, investors are waiting on the Federal Reserve, which is expected to reveal plans on Wednesday to taper its $120 billion monthly bond-purchasing program that was initially executed to support the economy during the pandemic. Investors will also be watching for any hints about the direction of interest rates and the recent surge in inflation.
“Today the economy is in a much better footing and with inflation at current levels we don’t need such amount of accommodative policies and a taper in turn will send a signal to the market that the economy is better off,” Michael Sheldon, chief investment officer at RDM Financial Group at Hightower, 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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