U.S. markets drifted lower Monday while growth stocks and related exchange traded funds maintained their dominance ahead of a Federal Reserve meeting later this week that will reveal its current stance on the interest rate outlook.
Investors continued to rotate back into growth stocks, with the Nasdaq higher for a sixth session out of the past seven. Many were also waiting on the Fed’s two-day policy meeting later this week, but most anticipate the central bank to maintain its interest rate near zero.
“The Fed’s messaging this year will be critical,” Glenmede strategists said in a note, the Wall Street Journal reports. “The Fed needs to convey its intention to wind down ultra-accommodative policy, but at the same time, convey that it has no intention of abruptly tightening policy, a fine line that could easily be miscommunicated."
Recent economic data has signaled that the U.S. economy is rebounding but not overheating, which has diminished concerns over inflation and dragged Treasury yields back down.
High-growth tech-related stocks, which suffered the brunt of the inflation-induced selloff driven by fears of rising rates, have regained their momentum this month, but economically sensitive sectors like industrials, financials, and materials have begun to fall behind.
“Stock markets are by and large around all-time highs. We think there is still more upside there,” Salman Baig, multiasset investment manager at Unigestion, told the WSJ. “We’re seeing clear signs that the recovery is sustainable.”
As the growth style rebounds from the pummeling it received from the inflation-induced selling pressure, investors can look to 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 (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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