AAmid fears that inflation will remain persistent and that the Federal Reserve could raise interest rates up to three times in 2022, growth and tech stocks were beaten on Thursday and have been weak in recent sessions. .
This price action shouldn’t be ignored, but some market watchers believe 10-year Treasury yields need to experience dramatic increases from current levels to really put value stocks back in fashion. Perhaps this is a sign that investors shouldn’t be rushing to bail out exchange-traded funds like the ETF ALPS Disruptive Technologies (CBOE: DTEC).
âThroughout the post-war period, when bond yields were below 3%, growth stocks offered investors consistently higher returns and much lower volatility than value stocks,â said Jim Paulsen. from Leuthold Group in a note to clients on Thursday. “Even though bond yields look set to rise in the coming years, the 10-year yield should double before the sweet spot for growth stocks is lost and growth finally loses its momentum.”
DTEC is down 2.44% over the past week, indicating that the fund, along with other disruptive growth strategies, is hampered by speculation about what the Federal Reserve has in store in 2022. This does not mean that a flight to value stocks is in progress. .
âInvesting in value – buying cheaper, economically sensitive stocks – has been a underperforming strategy for more than a decade with the US gauge in a downtrend relative to its growth counterpart since 2007. It hit an all-time low last month â, Cormac Mullen reports for Bloomberg.
In the short term, the debate over the Fed’s policy in 2022 could continue to weigh on growth stocks. However, DTEC has some ways to potentially surprise investors in the New Year. Notably, it is possible that if the Fed believes that rate hikes will weigh on economic growth, the central bank could reduce its tightening plans.
Speaking of economic growth, assuming it moderates as many pundits believe, investors could flock to growth stocks, perhaps giving DTEC some support along the way. DTEC is exposed to 10 themes, equally weighted, just like the components of the fund.
Other technology funds to consider include the ETF Technology Select Sector SPDR (NYSEArca: XLK) and the Fidelity MSCI Information Technology Index ETF (FTEC).
For more news, information and strategy, visit the website ETF building block channel.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.