Stock still have growth potential

Worried the recent pullback in growth stocks means the party is over for some of this year’s best investment bets? Citigroup Inc. says you needn’t be.
A stalwart investment style -- the practice of favoring so-called growth stocks, such as technology companies, over value shares like energy producers and banks -- is under scrutiny after losses in flagship growth plays from Apple Inc.to Facebook Inc.
But while the run up in growth equities has seen prices relative to value become stretched for U.S. stocks, the valuations are still “trivial” compared with the highs reached during the tech boom of the late 1990s, according to Citigroup’s global strategy team.
The largest technology stocks have returned about triple the S&P 500 Index in 2017, spurring concern investors may be overpaying for the shares. While some may be tempted to pivot to value equities, Citigroup says the latter will only make a comeback if bond yields climb along with a recovery in oil prices. The bank’s bond forecasters expect 10-year Treasury yields to remain aroundcurrent levels by the end of this year, putting them well below the marketconsensus for them to rise to 2.68 percent in that period.

Source: Bloomberg Pro Terminal

Trader I. Ivanov

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