Time for Growth ETFs As Inflation Starts Cooling?

The annual inflation rate in the United States decelerated for fourth month to 7.7% in October, the lowest since January, and below forecasts of 8%. It compares with 8.2% in September. Compared to the previous month, the CPI rose 0.4%, below expectations of 0.6% (read: 4 Sector ETFs to Win from October Inflation Data).

Shelter made up more than half of the increase (0.8%). At the same time, cost of medical care services (-0.6%) and commodities (0%) contributed negatively to the CPI. Investors should note that the Fed has acted super-hawkish since the start of the year to tame sky-high inflation.

The Federal Reserve hiked the target range for the federal funds rate by 75 bps (triple its usual margin) to 3.75%-4% during its November 2022 meeting. It marked a sixth successive rate hike and the fourth straight three-quarter point increase, pushing borrowing costs to a new high since 2008.

Growth stocks have been hit hard this year. Since the growth sector relies on easy borrowing for superior growth and its value depends heavily on future earnings, a rise in long-term yields cuts the present value of companies’ future earnings.

However, global stock markets increased on Nov 10, 2022 after the latest U.S. CPI inflation eased more than had been expected, triggering hopes the Federal Reserve might pare down plans for more interest rate hikes.

Investors are anxious that a tight monetary policy might send the global economy into recession. Despite the latest respite on the inflation front, it is too early to presume that prices are under control. Fed officials have said rates might have to stay elevated for some time.

Traders expect the Fed to raise its benchmark lending rate in December but by a smaller margin of half a percentage point. If the pace of Fed rate hike slows, growth ETFs should prosper. Against this backdrop, below we highlight a few growth ETFs that gained massively on Nov 10.

Growth ETFs in Focus

Invesco QQQ Trust QQQ – Up 7.4% on Nov 10 

The underlying Nasdaq-100 Index includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization. The fund charges 20 bps in fees.

SPDR Portfolio S&P 500 Growth ETF SPYG – Up 7.4%

The underlying S&P 500 Growth Index measures the performance of the large-capitalization growth sector in the U.S. equity market. The fund charges 4 bps in fees.

Invesco S&P 500 Pure Growth ETF RPG – Up 7.0%

The underlying S&P 500 Pure Growth Index measures the performance of securities that exhibit strong growth characteristics in the S&P 500 Index. The fund charges 35 bps in fees.

Invesco Dynamic Large Cap Growth ETF PWB – Up 5.8%

The underlying Dynamic Large Cap Growth Intellidex Index is designed to provide capital appreciation while maintaining consistent stylistically accurate exposure. The fund charges 55 bps in fees.

Nuveen Winslow LargeCap Growth ESG ETF NWLG – Up 5.6%

This ETF is active and does not track a benchmark. The Nuveen Winslow Large-Cap Growth ESG ETF is actively managed and invests at least 80% of its net assets in equity securities of U.S. companies with market capitalization in excess of $4 billion at the time of purchase, and demonstrates sustainable environmental, social and governance characteristics. The fund charges 64 bps in fees.

Zacks Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.

This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.