Despite the talk about growth stocks encountering headwinds, the Nasdaq 100 and S&P 500 Growth indexes are higher over the past month. They’re also both higher since the start of the year.
That’s impressive when considering the DeepSeek headlines and disappointing earnings reports from Google parent Alphabet (GOOGL) and Amazon (AMZN). There’s also the tariff threats that have pressured some semiconductor companies. Overall, growth stocks’ strength in the face of challenges could be an encouraging sign for the asset class going forward.
It could also be a reminder to investors to be judicious in their approach to mega-cap growth fare. And that could be reason to consider the WisdomTree U.S. Quality Growth Fund (QGRW ). Even with the aforementioned hurdles, the fund is higher by 2.22% over the past month. That confirms there’s validity with the combination of these two factors.
Why Growth ETF QGRW Can Deliver for Investors
The Federal Reserve is signaling it may lower interest rates just once this year. So some market observers are speculating rate hikes could arrive in the back half of this year if inflation charges higher. As was seen in 2022, Fed tightening could pressure growth equities.
However, QGRW could stand tall in such a scenario due to its deployment of the quality factor. This factor ensures many of the ETF’s holdings aren’t as rate-sensitive as smaller or lower-quality growth names. Additionally, the fund’s exposure to the Magnificent Seven could be a perk at a time when earnings growth remains coveted.
“Complicating the traditional narrative about growth stocks, interest rates, and stretched valuations are the mega-cap companies that continue to dominate the market,” noted Sarah Hansen of Morningstar. “The so-called Magnificent Seven—Nvidia, Tesla TSLA, Meta, Apple AAPL, Amazon.com AMZN, Microsoft, and Alphabet—are widely considered growth stocks. But their seemingly unstoppable earnings growth and a powerful tailwind from AI means they haven’t been as susceptible to rate changes as some of their smaller counterparts.”
Star Stocks Justify Lofty Multiples
The Magnificent Seven represent QGRW’s top six holdings, and seven of the top eight. That combines for approximately half the fund’s roster. Those star stocks have led the market higher for several years. And they have the earning power to justify lofty multiples.
The quality traits found up and down the QGRW roster are critical at a time when quality is exactly what some experts believe is needed by growth equities to extend their uptrend.
“Some are emphasizing ‘quality’ growth stocks—those that tend to be more profitable, have steadier cash flows, and see attractive returns,” added Hansen. “Analysts say a focus on quality is a distinction worth [making. That’s because] stocks that fit the criteria will behave differently than those that don’t when the winds change for interest rates, even within the broader growth category.”
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