5 Ultra-Cheap Growth ETFs To Tap On Global Stimulus Hopes

After a bumpy ride in August due to escalation in the U.S.-China trade tariff war, Wall Street heaved a sigh of relief this month. This is primarily thanks to hopes of resumption in trade talks next month and monetary easing policies across the globe.

China’s central bank last week cut its reserve requirements for the seventh time since the start of 2018, reducing the amount of cash that banks are mandated to keep in reserve and thereby freeing up as much as 900 billion yuan ($126 billion) in liquidity. The bank has cut the reserve requirement ratio (RRR) by 50 bps for all banks, with an additional 100 bps cut for qualified city commercial banks. The RRR for large banks will be lowered to 13.0%.

The European Central Bank (ECB) is also expected to deploy further stimulus to shore up the 19-member eurozone economy, citing persistent low inflation and sluggish growth. Market participants are betting that the ECB will cut its interest rate on bank overnight deposits for the first time since 2016, when it meets on Sep 12. Meanwhile, the Federal Reserve is also expected to cut interest rates later this month. Market expectations of a 25 basis-point rate cut are at 91.2%, according the CME Group’s FedWatch tool.

Hopes of rounds of global easing policies are instilling strong confidence in the stock market, returning investors’ risk appetite. Against this backdrop, nothing seems a better strategy than growth. This is especially true, as growth stocks refer to high-quality stocks that are likely to witness revenue and earnings growth at a faster rate than the industry average. These stocks harness their momentum in earnings to create a positive bias in the market, resulting in rocketing share prices. As such, growth stocks tend to outperform during an uptrend.

However, it is worth noting that these funds offer exposure to stocks with growth characteristics that have comparatively higher P/B, P/S and P/E ratios and exhibit a greater degree of volatility when compared to value stocks.

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