Growth stocks are back in business after the market meltdown earlier this month shows no sign of serious deterioration, according to experts.
ETFs which track global growth stocks gained an average 7.2% over the past year, and have inched back into positive territory since 1 January at around 1.5%.
The gains come despite significant falls in most equity indexes earlier this month, which saw the volatility VIX index spike from nine to 37 points in a day and caused several inverse volatility ETFs to drop off a shelf.
In terms of cumulative inflows, growth ETFs – which favour stocks that tend to perform well in the boom times – have seen around $2.5 billion in the past month alone, after suffering outflows in late January of around $750 million.
Analysts are still concerned that the Trump rally can only continue so long and that the market, particularly the US market, is overvalued. As Jan van Eck, CEO of VanEck told Jobs In ETFs: “Trump is doing a lot of pro-business things after an anti-business President but that won’t last forever. That’s a one-year phenomenon, it won’t continue to boost the market. The economy has to do that.”
Growth ETFs back in fashion
However, as the market recovered after the February dip, growth ETFs have seen returned attention.
The cheapest costs 0.06% and is the Vanguard Growth ETF (VUG), which tracks around 300 companies such as Apple, Alphabet, Nasdaq, Google and Amazon. The $32 billion ETF has gained $480 million in new inflows since 12 February alone. It is close to 4% returns since the New Year.
Vanguard also offers funds which offer small and mid-cap exposure in the growth category, and both cost 0.07%. The small cap fund is performing better than mid-caps at the moment, with $151 million inflows and returns of almost 2%, according to TrackInsight.
Value stocks are in the red
Meanwhile value stocks – seen as the opposite kind of companies to growth stocks – are still in the red after February’s blip. On average they have minus 1.45% returns since 1 Jan and outflows have tracked sideways since mid-February, currently standing at around minus $470 million year to date.