Senior portfolio manager Arjan Palthe claims that growth stocks will do well if confidence in equity markets improves after the July/August sell-off.
He says: “When markets rebound, we believe that people will first buy the larger, less risky stocks because they will still be cautious about the markets. In that climate, stocks of quality companies with a proven track record of delivering profit growth are likely to outperform.”
Palthe believes that growth stocks also have medium-term attractions and is confident that investors will turn to the growth style in the less robust economic environment ahead.
He adds the slowdown in demand in the US is being offset by solid demand both within Europe and from Latin American and Asia, but European indicators seem to be peaking and European profit growth will probably start to decline.
He says: “In the more cautious economic environment ahead, we expect investors to seek out companies with a business model or exposure to certain industries that allows them to outgrow the market in terms of earnings growth. This will prompt investors to turn to growth stocks.”