ETFdb Logo
  • ETF Database
  • Channels
    • Themes
      • Active ETF
      • Alternatives Channel
      • Artificial Intelligence
      • China Insights
      • Climate Insights
      • Core Strategies
      • Crypto
      • Disruptive Technology
      • Energy Infrastructure
      • ETF Building Blocks
      • ETF Education
      • ETF Investing
      • ETF Strategist
      • Faith-Based Investing
      • Financial Literacy
      • Fixed Income
      • Free Cash Flow
      • Innovative ETFs
      • Invest Beyond Cash
      • Leveraged & Inverse
      • Modern Alpha
      • Portfolio Strategies
      • Tax Efficient Income
    • Asset Class
      • Equity
        • U.S. Equity
        • Int'l Developed
        • Emerging Market Equities
      • Alternatives
        • Gold/Silver/Critical Materials
        • Crypytocurrency
        • Currency
        • Volatility
      • Fixed Income
        • Investment Grade Corporates
        • US Treasuries & TIPS
        • High Yield Corporates
        • Int'l Fixed Income
    • ETF Ecosystem
    • ETFs in Canada
    • Market Outlook
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Database Categories
    • Indexes
    • Scenario Analysis
    • Watchlists
    • Head-To-Head ETF Comparison Tool
    • Mutual Fund To ETF Converter
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • Gaining Perspective Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Dual Impact Channel
  2. Position for Growth Stock Recovery With IQSU
Dual Impact Channel
Share

Position for Growth Stock Recovery With IQSU

Tom LydonNov 30, 2022
2022-11-30

Experienced environmental, social, and governance (ESG) investors know that many of the exchange traded funds in this category are heavily allocated (though not entirely dedicated) to growth stocks. That makes ETFs such as the IQ Candriam ESG US Large Cap Equity ETF (IQSU B+) potentially attractive ways for investors to position for rebounds in growth stocks without the full commitment of a dedicated growth fund.

Indeed, there’s no denying that growth stocks are taking it on the chin this year, reversing a more than decade-long run of outperformance over value fare. Six interest rate increases by the Federal Reserve are punishing growth stocks, but in what could prove to be good news for ETFs such as IQSU, some market observers are constructive on growth equities for 2023. In fact, it’s possible that high inflation will cease being a drag on growth stocks.

“Despite its sharp inflation, the ‘70s enjoyed the second-largest improvement in corporate profits. Meanwhile, the 2010s experienced both the lowest inflation and the second-weakest profit growth,” noted Morningstar’s John Rekenthaler. “(If you are speculating that the 2010s sputtered because the arrival of COVID-19 ruined the final year’s totals, well considered. However, that hypothesis fails, as I concluded that decade in December 2019.) In fact, those findings imply that inflation improves profits.”

Those constructive comments about corporate profits are meaningful to investors considering IQSU because the ETF allocates 50.4% of its weight to technology and consumer discretionary stocks — two of the sectors in which market participants are fretting about earnings growth.

As noted above, rising interest rates have been a drag on growth stocks this year, implying that growth companies are highly levered to goings-on in the bond market. While there’s no denying that growth stocks are faltering in 2022 at the hands of rising bond yields, such linkages aren’t consistent over long holding periods.

“The link between the behavior of growth stocks and that of the bond market is indeed inconsistent. Over the past year, though, it has been very much in evidence, as witnessed by the correlations between the monthly returns of growth stocks, value stocks, and long U.S. Treasury bonds,” added Rekenthaler.

Looking ahead to 2023, Rekenthaler outlined three scenarios, two of which bode well for growth stocks. Those are inflation topping out and the U.S. economy avoiding recession, and inflation peaking while the economy enters contraction. The latter, though obviously less desirable, could still benefit growth stocks, including some IQSU components, because in a recession, higher rates of sales and earnings growth would be desirable to market participants.

For more news, information, and strategy, visit the Dual Impact Channel.

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2025 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X