Growth stocks and related exchange traded funds surged Tuesday as traders waited on Federal Reserve Chair Jerome Powell’s testimony before Congress.
Powell reiterated that the recent spike in inflation was expected to be transitory. Growth stocks have gained momentum and have taken the lead in the markets after the Fed last week stated that it would hike interest rates sooner than expected.
“The market was caught off guard regarding the Fed’s hawkish commentary, and that’s 100% of what is happening,” Andrew Mies, chief investment officer of 6 Meridian, told Reuters. “All the smart people were surprised about how hawkish the Fed was, and now they are adjusting their portfolios.”
Powell’s testimony is expected to cover the central bank’s response to the coronavirus pandemic and his outlook on inflation and the labor market, which could offer hints into interest rate hikes and potential easing of the bond purchasing program.
“The market is in a very fragile, emotional state,” Altaf Kassam, head of investment strategy for State Street Global Advisors, told the Wall Street Journal. “It will be a rocky road, it will be bumpy and pronouncements from central bankers are going to get very quick, knee-jerk responses.”
Investors who are interested in the growth style can turn to targeted 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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