Growth ETFs Took Charge To Start 2H: Will This Continue?

After logging the strongest first-half performance in decades, the bulls are showing no signs of checking the global growth concern. This is primarily thanks to trade optimism, which is acting as the biggest catalyst for this year. The trade truce between the United States and China once again sent the S&P 500 and Dow Jones to a new all-time high to start the second half.

Additionally, the Fed signaled that it will cut interest rates anytime soon, sparking a rally in the stock market. In fact, bouts of weak data this week have stirred speculation over easy money policies. Lower rates would make borrowings cheaper, providing a boost to both investment in new projects and repayment of higher-rate debt. As such, it would lead to strong economic growth and is thus a boon for the stock market.

Further, oil price rallied following the extended OPEC oil supply cut deal until March 2020. A slew of mergers & acquisitions added to the strength.

Given the extremely bullish trends, growth investing took charge this week with many ETFs hitting fresh highs. This is especially true, as growth stocks refer to high-quality stocks that are likely to witness revenue and earnings increase 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 higher degree of volatility when compared to value stocks.

Still, we have highlighted those ETFs that hit all-time highs in the recent trading session and has the momentum to continue outperforming if the trend remained the same. This is because all these funds have a Zacks ETF Rank #1 (Strong Buy) or 2 (Buy).

SPDR S&P 500 Growth ETF (SPYG - Free Report)
 
This product follows the S&P 500 Growth Index, holding 295 stocks in its basket. It is pretty well spread across components with none holding more than 7.9% of the assets. SPYG is heavy on information technology sector with 26.5% allocation, while health care, communication services, and consumer discretionary round off the next three. The product has amassed $5.5 billion in its asset base and charges investors 4 bps in annual fees. Volume is good exchanging about 1.5 million shares a day on average. The ETF has gained 2.9% over the past week and has a Zacks ETF Rank #1.

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