Can Growth Stocks Keep Climbing Amid the Current Rally?

Growth-oriented equities, particularly in the technology sector, keep on thriving amid social distancing measures in place as a result of Covid-19. As more companies rely more heavily on technology, it makes sense that these growth stocks can keep climbing, or can they?

Research company Bernstein doesn’t seem to think so.

“For investors worried that growth stocks’ valuations are approaching extreme levels last seen during the dotcom bubble, Bernstein said they are looking at the wrong place,” a CNBC Pro article noted. “The Wall Street firm said many market watchers are focused on tech multiples relative to the broader market and draw comparisons to the 2000s. But due to the different macro environment, this method doesn’t paint an accurate picture of the valuation of the growth sector.”

“Instead, Bernstein said investors should look at high-growth stock valuations compared to their low-growth peers, and they are still far from the extremes of 20 years ago,” the article added.


^MSACWIG data by YCharts

Investors looking to capitalize on the latest growth themes could give funds like the Global X Thematic Growth ETF (GXTG) a look. The fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Thematic Growth Index.

The fund invests at least 80% of its total assets in the securities of the underlying index. The underlying index seeks to provide broad exposure to thematic growth strategies using a portfolio of ETFs.

GXTG offers investors:

  • A multi-theme solution: In a single trade, GXTG delivers access to multiple disruptive macro-trends arising from technological advancements, changing demographics and consumer preferences, or evolving needs for infrastructure and other finite resources.
  • High growth potential: GXTG invests in a basket of individual thematic ETFs that exhibit high long-term growth potential.
  • A core building block: GXTG is designed to be a core building block for growth-oriented portfolios, offering broad thematic exposure at a 0.50% total expense ratio.

Additionally, investors wanting a piece large cap tech action can look to the Fidelity MSCI Information Technology Index ETF (FTEC). FTEC tries to reflect the performance of the Nasdaq-100 Technology Sector Index, which consists of companies in the Nasdaq-100 Index classified as technology according to the Industry Classification Benchmark.

Other ways to get broad tech exposure include the Technology Select Sector SPDR ETF (NYSEArca: XLK). XLK tries to reflect the performance of the Technology Select Sector Index, which is comprised of technology and telecom sector of the S&P 500.

For more market trends, visit ETF Trends.