Is the rate hike fight finally settling in for that “higher for longer” regime markets have heard so much about? With news that the Federal Reserve held off on further hikes to start November, that might be the case. The economy actually looks strong despite suggestions otherwise per the most recent commentary by Professor Jeremy Siegel, senior economist to WisdomTree Investments. As such, now could be a good time to take a closer look at the merits of a quality growth ETF like QGRW.
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Why look to a quality growth approach? Markets may be getting used to a higher-for-longer rate regime. While earlier this year markets seemed set on pricing in or looking forward to a rate cut, that remains a ways away. The implied probability still has the fed funds rate at about 4.5% by January 2025, even — not exactly soon.
The Fed seems to believe that even if it were to cut rates at some point, it wouldn’t cut significantly. This, taken together with the overall higher-for-longer regime, implies some degree of confidence that the economy can live with the current rates. That suggests an ETF that avoids firms struggling with higher-for-longer rates but still looks for growth can play a role.
QGRW’s Quality Growth ETF Approach
That speaks to the case for the WisdomTree U.S. Quality Growth Fund (QGRW). The fund tracks the WisdomTree U.S. Quality Growth Index, a market-cap-weighted list of 100 large-cap growth names.
Those names must meet certain quality standards that help the ETF target profitability and high-conviction allocations. The strategy ranks eligible securities from the 500 largest firms in the U.S. equity space based on equal-weighted growth and quality scores.
Charging 28 basis points, the quality growth ETF caps holdings at 15% to boost diversification. Doing so has helped it return 35.3% YTD. For investors looking for a strategy in a higher-for-longer regime, it could be an ETF worth considering.
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