Growth stocks have been slammed this year amid a broad bear market slump, but a slew of Wall Street banks believe the tide is now turning. Investors had rotated out of growth stocks — such as tech — and into value as soaring inflation and rising interest rates sent them clamoring for safer bets in a volatile market. Higher interest rates have a greater impact on growth stocks as they generate most of their cash flows and earnings in the future. But market sentiment appears to be shifting.
"Consistent with history, we expect investors will reward higher quality growth stocks but continue to avoid unprofitable growth stocks that would be required to tap into financial markets at a time when the cost of capital is rising, he added. Bernstein also upgraded its outlook for long-duration stocks, otherwise also known as growth stocks. Such shares typically outperform in a recession, particularly in the latter leg of major market downturns, it said.