The growth factor has extended its dominance over value strategies this year. Some market observers believe that theme will repeat in 2020. For investors looking to capitalize on that trend, the Direxion Russell 1000 Growth Over Value ETF (RWGV) is an ETF that makes sense.
Each Direxion Relative Weight ETF, including RWGV, is built with a 150% long component and 50% short component, resulting in a net exposure of 100% of assets. RWGV gives investors the ability to benefit not only from growth opportunities potentially performing well but from their outperformance compared to value.
There are reasons to believe growth will continue leading value next year, making RWGV an alluring play for investors.
Investors can still enhance their portfolios as the bull market extends with growth-oriented stocks that continue to perform despite the recent bouts of volatility. The growth style has outperformed the market in spite of being prone to sell-offs with strong corporate earnings.
Growth Grinding Higher
“Large caps and growth stocks have benefited from macro tailwinds including fears of slowing global growth and endless US-China trade uncertainty, both of which have pushed investors towards higher quality blue chips with more dependable growth than their more economically sensitive, small cap, value counterparts,” said FTSE Russell Managing Director Alec Young in a recent note.
Growth stocks are often associated with high-quality, prosperous companies whose earnings are expected to continue increasing at an above-average rate relative to the market. Growth stocks generally have high price-to-earnings (P/E) ratios and high price-to-book ratios. Still, data suggest the growth/value premium isn’t overly elevated relative to historical norms.
“Growth worries have also driven interest rates to record lows, boosting large cap and growth indexes that have less exposure to financials, a sector whose margins are pressured by falling rates,” said FTSE’s Young. “In addition, large cap and growth indices also enjoy much greater exposure to technology, which is by far the best performing sector YTD.”
The technology sector represents over 53% of RWGV’s long exposure.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.