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.