Growth Stocks Take the Lead. What's JPMorgan's Position on the Group?

Growth Stocks Take the Lead. What's JPMorgan's Position on the Group? ...

Growth stocks have taken the lead in the recent resurgent stock markets.

Since June 16, the Russell 1000 Growth index has increased by 22%, while the Russell 1000 Value index has decreased slightly.

The downward trend in bond rates aided growth stocks because the promise of their future earnings stream for risk-free assets is superior.

JPMorgan strategists write in a commentary that not just low-quality growth stocks are rising. Some of the basket of growth opportunities that we identified have increased by 50% or more in the past two to three months.

Adyen, Avino, and ASML take a look at these posts.

And these are stocks that have significant market caps, not fringe plays.

The strategists cited Adyen (ADYEY), the Dutch payment-processing software provider, and Canadas Avino Silver & Gold Mines (ASM).

ASML (ASML), a Dutch photolithography supplier for semiconductors, has increased about 35% from its low on July 6.

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Is the improvement [for growth stocks] getting too much, and should one get back to basics? the strategists ask rhetorically. Not yet.

The key is in long-term yields, where the peaking at the midyear was one of the key drivers for the rebound in [stocks]," according to analysts. The 10-year Treasury yield peaked at 3.48% on June 14 and has since dropped to 2.78% as of August 15.

Yields should remain steady until economic activity drops to its lowest level, sometime in the fourth quarter, according to the officials.

Pivot from the Federal Reserve

The Federal Reserve would have to deviate from raising interest rates in order for value stocks to regain their advantage over growth, according to the strategists. The yield curve would have to steepen.

According to the strategists, a return to value stocks would not necessarily result in a decline in the overall stock market.

Value might lead again in a continued up market as economic activity nears its trough, according to the researchers. Value factor and market direction have historically been positively correlated.

The strategists recommended a tactical rebound in growth stocks, particularly the technology sector, in July. We believed this would improve the broad market levels, according to the strategists.

We continue to believe that the surge in growth is only tacit, but it may take longer to recover than expected. Perhaps even until the end of the year.

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