As we enter the second half of 2015, growth investors have a lot to consider. The market has been in bull mode for several years. Europe is cutting interest rates to below zero. Greece is on the brink of collapse (still). And the Federal Reserve is getting ready to raise rates.
There is a lot going on. But one thing remains true: Investors who stay the course in the best growth stocks tend to outperform the market over the long term.
Trading in and out of stocks is a fool’s game during a bull market. Sure, there are cases where you need to get out of a stock that has lost its mojo. But don’t make the mistake of trading too much and overthinking a bull market.
It’s far better to get into the best sectors, with the best stocks, and wait patiently as the market delivers gains to you.
Select growth stocks have handed investors some of the biggest profits in the stock market. That’s particularly true over the last couple of years. And though some think this market is running out of steam in mid-2015, the evidence in front of us suggests otherwise.
Growth stocks are leading this market. Year-to-date the tech-heavy Nasdaq Composite is up 7%. The Russell 2000 small-cap index is up 5.8%.
By comparison, the S&P 500 is only up 1.9%. And the Dow Jones Industrial Average is up a mere 0.6%.
Both the Nasdaq and the Russell 2000 tend to be focused on growth names, just due to the nature of those indexes. And there may be some benefit, as compared to the S&P 500 and the Dow, since there are relatively fewer interest rate sensitive and energy stocks – two areas that are not doing well in 2015.
Either way you slice it, the point is that growth stocks are leading this market right now. Though there are warning signs that we need to monitor, such as relatively high valuations, the current trend is up.
And with an improving labor market, and a likely increase in second half gross domestic product, growth stocks will probably lead through the end of the year too.
The message for investors is to continue to own and selectively buy what’s been working. In my areas of research this includes a variety of technology stocks, from cloud computing and specialty software to select semiconductor stocks.
I also continue to be bullish on housing and construction-related stocks given my view (and the supporting data) that these markets are moving from recovery to growth mode.
It’s difficult, if not impossible, for investors to completely avoid lagging stocks and only be invested in leading stocks. That’s why diversification is so important.
But clearly it’s important to be invested in the strongest area of the market while it is in bull market mode. Right now that area is growth stocks. And based on what the market is telling us right now, I predict that growth stocks will continue to lead throughout the rest of 2015.
Tesla, Apple and Google are creating this
When people think of Tesla, what immediately comes to mind is the world’s first electric car. It’s an astounding achievement. But what few people realize is that Tesla’s next technological wonder could easily put it to shame. Morgan Stanley says this breakthrough could save the American economy $1.3 trillion each year. And Tesla’s not the only one racing to get it out the door. Apple and Google are working on their own versions too. Get the whole story right here.