Growth stocks have been on an upward trajectory for years, a trend that has accelerated due to the COVID-19 pandemic. In this article, we shares insights from Munro Partners, global growth investment managers.
While classifying stocks as either growth or value is a relatively simplistic view, it’s one that’s had particular relevance in the current environment. Growth stocks – those sought by investors looking for capital appreciation – have been a beneficiary of markets in recent history, and a trend that’s accelerated during the COVID-19 pandemic.
What’s driving growth stocks in the current environment?
Earnings growth drives stock prices. It’s a truism that holds through all market conditions and all cycles, and the COVID-19 induced market volatility is no exception. It is important for investors to look through the volatility, beyond the short-term gyrations, and to focus on the companies that will be better off on the other side of this crisis.
A standard explanation as to why growth investing has been doing well is that interest rates have fallen so markedly. In a post-COVID world, interest rates have moved even lower, so this explanation would suggest growth stocks will continue to appreciate.
The views expressed are her own and do not consider the circumstances of any investor.
