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The success of growth stocks appears to follow market sentiment in a more volatile manner than that of income stocks.
Sometimes investors are more open to growth opportunities in stocks. And other times, few people want to touch them.
For most of the last decade, even before Covid struck, the mood has been gloomy.
Is the recession over?
But Bank of England (BoE) Governor Andrew Bailey has said the UK's recession may already be over. He added that, by historical standards, it is “the weakest recession by far“.
Still hesitant about interest rate cuts. But they will surely have to arrive soon.
If there is economic growth on the cards, along with interest rate optimism, I think that could give stocks a boost. In particular, I'm thinking about UK growth stocks, and I think some could point to a further rise.
Top Growth stocks?
right movement (LSE: RMV) is one that I think could see good growth when interest rates come down.
Rightmove's share price has been hit by the property downturn. And that is understandable. But we are looking at a modest increase of 11% in the last five years. And I think that shows the underlying resilience of the business.
We've seen high-profile competition come and go. But in tough times, it's those with long-term core strengths who shine. As the UK's largest property portal, I think Rightmove has that defensive strength.
Interest rates
Brokers' forecasts seem a bit cautious, with only modest growth predicted in the coming years. I assume they are being cautious with interest rates, as is the Bank of England.
However, mortgage lenders are more optimistic and some have already reduced their rates.
We may still have weakness for a while. It will surely take time, once rates come down, for it to largely trickle down to the real estate market. So there is a risk for those who buy now.
But I think we could see a bright spell for Rightmove and for housebuilders themselves.
More growth stocks
I believe the same factors could cause some real estate investment trusts (REITs) to head higher as well.
High interest rates hold back Primary health properties. His stock has been falling for the past few years. And that's despite the fact that it makes its rent money for the healthcare market, which is strong.
Tritax Large Box The stock has rallied a bit in 2024. But I think demand for logistics warehouses could give these and similar REIT stocks a boost.
I would say the risks for REITs are similar to those for Rightmove and builders.
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Energy
Aside from those deeply affected by interest rates, I see many renewable energy stocks falling out of fashion.
Everything related to hydrogen storage, lithium production, battery technology… were booming businesses just a few years ago. In my opinion, people jumped on the bandwagon too early, as is often the case with technology-based stocks.
But these are all areas where we could see renewed growth starting in 2024. I really think it could be a good year.
