We are likely only a couple months away from the peak in “real yields” that warrants looking for opportunities to now invest in “growth”, says Mona Mahajan. She’s a Senior Investment Strategist at Edward Jones.
Look for quality names at a discount
Mahajan agrees the growth stocks will likely remain volatile in the coming weeks but recommends that investors use that volatility to pick quality names at a discount. On CNBC’s “Closing Bell”, she said:
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Historically, that peak in yields comes about two months before the peak in federal funds rate. That’s when the longer duration parts of the market tend to work better – that’s when growth can work better.
2 Year Treasury now sits at 4.20%; a level last seen in 2007. This compares to the 10 Year way below at 3.69%. Fed Chair Jerome Powell now concedes that chances of a soft landing are rather slim.
Own the secular winners in growth stocks
FOMC, on September 21st, signalled a terminal rate of 4.6% in 2023 that leaves the door open for another 75-bps increase in either of its remaining two policy meetings this year. (find out more)
Consequently, there’s been a lot of carnage in “growth” this week.
Nasdaq is now down over 30% for the year, which, as per Mahajan, makes growth stocks all the more attractive in terms of valuation. Explaining what in particular to own, she said:
We’ll see the stable, quality parts of the growth market recovering first. Within it, there’s some secular winners from a long-term perspective, like cyber, healthcare, robotics, cloud enterprise spending – anything with established business model.
She, however, cautions against going into “speculative” growth.
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