Is the massacre in growth stocks over?
XM Group | Mar 17, 2022 11:39AM ET
Risks abound
The mood in financial markets has turned bearish lately. Investors have been overwhelmed by an onslaught of negative developments - war in Ukraine, lockdowns in China, spiraling inflation eating into the spending power of consumers, and central banks raising interest rates in the middle of an economic slowdown.
There’s also the risk of an ‘accident’ in credit markets. Many worry that Russia might default on its debt, setting off a domino effect. Even if that doesn’t happen, there is still a very real possibility that businesses with high exposure to the Russian economy might suffer dearly once the draconian sanctions begin to bite.
That said, it seems like the worst phase of the storm is over, especially for growth shares that have already suffered so much. Investors are sitting on a lot of cash and with inflation so high, they want to put that to work.
Buying bonds doesn't seem very attractive here unless the investor is willing to hold them until maturity. Commodities have already gone parabolic, and crypto markets are too small. That leaves equities as the only game in town.
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