Why Growth Stocks Could be the New Target of the Big Money Hunt

Welcome back to the show. In today’s instalment of Markets and Money, you’ll be treated to several emerging secular themes. That is, now that the rubbish month of May is behind us, we can look to the second half of the calendar year and see what’s ahead. But before we look ahead, let’s look behind one more time.

Did you know that in the month of May, not a single stock on the S&P 500 with a dividend yield of more than 4% rose by more than 10% for the month? On the other hand, there were at least five high-yield stocks that fell more than 10% for the month. And Friday didn’t help, with both the Dow Jones Industrials and the S&P 500 falling more than 1% in an ugly day.

We’re going to ask our friend Phil Anderson what he thinks about this. If you missed it over the weekend, Phil’s presentation ‘Remembering the Future: How to understand and profit from the Australian property cycle’  is now available on DVD. Phil told us in March that the new highs on the Dow were confirmation that a new credit expansion was underway and that it would make its way to Australian property prices, with a specific lag time.

Friday’s data from the Dow — and the general pummeling high-yield stocks took in May — could be a sign that the ‘hunt for yield’ is over. The hunt for growth may replace it. And if that’s the case, you could see some fund managers redoing their asset allocation strategies to chase growth. The chart below is evidence that it may already be happening.


Source: StockCharts


The security above is an exchange traded fund that tracks an index of investment grade corporate bonds in the US. It’s only a year-to-date chart. But you can see that once May rolled around and government bond yields started to rise, investors dumped a proxy for corporate bonds. If that trend continues, you’d expect a much bigger rally in growth stocks and a sell-off in fixed income ETFs.

Our in-house trader Murray Dawes has been looking at ways to trade US ETFs. We’ll see what he has to say about the chart above. If it’s a tradable, this is a simple way for Aussie investors to have a punt on an emerging theme. There’s a bigger universe of securities like this in the US. To the extent they are proxies for a sector or an asset class, it makes virtually any macro idea tradable.

But an even simpler idea would be to ferret out the best growth stocks. And if it’s growth you want, it’s technology you’ll have to look at. We have another team on the case here in the office. Sam Volkering and Kris Sayce are just about ready to make their new technology project public. Stay tuned.

Regards,
Dan Denning
for Markets and Money

Join me on Google Plus

From the Archives…

Why You Should Keep Your Portfolio Grounded in Cash
31-05-13 – Vern Gowdie

China’s City in the Sky
30-05-13 – Dan Denning

House Prices First, Stocks Second.
29-05-13 ­– Dan Denning

Why Natural Gas Could be the Next Crucial Industry for Australia
28-05-13 – Dan Denning

The Japan’s Nikkei is Starting to Crack
27-05-13 – Dan Denning

Free report reveals:

Aussie Dollar Crash 2017

Markets & Money Free ReportWhy our currency could be headed below 50 US cents…what the dollar crash could mean for you…and what you could do today to protect yourself from the fallout.

Download this free report right now and discover:

  • Why the Aussie dollar could tumble in 2017: Greg reveals his detailed analysis on what he believes to be the coming Aussie dollar crash, and why you could see our dollar plunge as low as 50 US cents.
  • Our $1 TRILLION ‘debt-bomb’: Aussies have borrowed over $1 trillion to maintain the lifestyle we’ve become accustomed to over the last two decades. Greg explains how a plunging dollar could detonate this ticking ‘debt-bomb’. And why your wealth, lifestyle and retirement dreams are in the firing line.
  • REVEALED: The Middle Kingdom growth ‘mirage’: If you think all is well in China — think again. Greg reveals why he believes China’s synthetic economic growth could have a devastating effect on the Aussie dollar and, by default, your wealth.

To download this FREE report right now — plus, to take out a subscription to the free daily e-letter Markets and Money — simply enter your email address in the box below and click ’Send My Free Report‘.

We will collect and handle your personal information in accordance with our Privacy Policy.

You can cancel your subscription at any time.

Leave a Reply

Be the First to Comment!

Notify of
avatar
wpDiscuz
Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@marketsandmoney.com.au