Although growth stocks have outperformed over the last decade on Wall Street, as the US economy inching closer to the old normal, market leadership has moved toward value-oriented and cyclical names.
Stocks hit worst by the covid-19 pandemic might still pose as an attractive investment opportunity, said Grant Bowers, Portfolio Manager, Research Analyst Franklin Equity Group. “Epicenter stock prices have recovered to some extent in recent months, but we still see an opportunity for improving growth in the consumer space as pandemic restrictions are lifted, benefitting restaurants, travel and consumer-oriented technology companies,” he added. Bowers believes that the equity movement on Wall Street might not be uniform from here on, with every company seeing a different level of appreciation resulting in a fragmented equity market of winners and losers.
Epicentre stocks, according to Grant Bowers, are those companies that underperformed dramatically as the pandemic forced changes in our work, travel and social behaviours. The growth in these stocks could be supported by pent-up consumer demand, coupled with high savings rates. “We think pent-up consumer demand is going to be a huge growth driver — as of March 2021, the US personal saving rate stood at 27.6%, a huge increase from 8.3% in March of last year,” Bowers said. Amid the pandemic and resultant lockdowns, consumers in the United States and other countries have not spent money as they used to till the end of 2019. “We expect consumers to seek out products offered by the retail sector as well as activities and experiences,” he added.
Spotting emerging trends in the market that might be here to stay for good, Grant Bowers said that the contactless habits spurred by the global pandemic are likely to continue. Further, he said that the role of the health care sector may also remain elevated. “Health care, for obvious reasons, will also likely take a front and centre role in our economy for many years to come. Consumers want better health care, treatment and access, and technological advances can facilitate that,” he added.
Although growth stocks have outperformed over the last decade on Wall Street, as the US economy inching closer to the old normal, market leadership has moved toward value-oriented and cyclical names. However, for long-term investors, Bowers argues that growth is better positioned than value. “Our preference is to own companies with better pricing power prospects, benefiting from secular growth trends and a higher degree of earnings predictability,” he added.