Growth stocks are leading the way this year. The S&P 500 Growth Index has rallied 11%.
But with recession worries still swirling, many fear the rally is unsustainable. Based on history, growth is where you want to bet.
Let’s cover 5 feathers in the growth-tilted bull camp.
The following chart shows why growth stocks are a great bet when GDP is 2% or less:
Analyzing the sector weights of the S&P 500 Growth and Value indices is a great way to grasp exposures.
There are major differences, especially with Technology.
The S&P 500 Growth Index has a monster 34% allocation to tech – that’s double the 17% of the value index.
Next, health care represents 19% of the growth bucket, double value’s 9.5%. Energy is the other big outlier in the growth index at 7% vs. sub 2% in value.
On the flip side, notice growth’s big underweights relative to value. Financials represent a skimpy 7% vs. 20% in the value index.
Growth’s sector DNA is positioned for continued strength. High-quality stocks are dependable when the economy hits the skids.
The Growth Index has large 44% weighting to mega-cap names in the Technology and Discretionary space like: Apple (AAPL), Microsoft (MSFT), NVIDIA (NVDA), Home Depot (HD), Starbucks (SBUX), NIKE (NIKE), and Amazon (AMZN)
This lines up well with the MAPsignals sector leaders with Discretionary (XLY) and Technology (XLK) ranked highest all year:
Focus on quality and best of breed stocks during a challenging economic climate.
Bet on growth stock when the economy is weak. A sub 2% GDP reading favors high-quality names which can add ballast to your portfolio.
For a deeper dive on this writeup, you can read the longer version here.
Disclosure: the author holds no position in XLK, XLY, AAPL, NVDA, & AMZN at the time of publication. He does hold long positions in MSFT, NKE, HD, & SBUX in personal and managed accounts at the time of publication.
Learn more about the MAPsignals process here.
Lucas is a well-versed equity investor and educator. He currently is co-founder of research and analytics firm, MAPsignals.com, which focuses on finding outlier stocks by following the Big Money.