The writer is head of BlackRock's Wealth Advisory.
From the BlackRock blog, November 12:Growth stocks have outpaced the broad market for several years running. Can they continue their winning ways in an economic slowdown? Martin Small poses this question and more to veteran growth investor Lawrence Kemp.Growth stocks have outperformed their value peers and the broad market in 2019, and have been on a strong run for the better part of the post-crisis period. Is the eventual slowing of economic momentum a death knell for growth stocks, or can they continue to deliver for investors? I recently sat down with Lawrence Kemp, head of BlackRock’s U.S. Growth equity team, to get his outlook.
Martin: Lawrence, growth has had a good run. What I hear most frequently is that it’s unsustainable, it’s a trade. What do you say to that?
Lawrence: It’s true that growth has done well for some time now, but we firmly believe growth stocks are not a “trade.” Growth has become a much more ubiquitous part of the market as companies across all industries implement technology to lower costs and gain market share.
What’s particularly exciting about growth investing today is that, for the first time, we’ve been in an economic environment without a traditional business cycle. What I mean by that is many of the things that may have boosted certain parts of the stock market in the past ― like inflation, interest rates, oil or commodity prices ― are unlikely to provide a meaningful tailwind for equities. And this means investors will seek out companies that prosper organically on their own, almost independent of the economic cycle. I think this will be a good sign for growth stocks overall, not only today but for years to come.
Martin: This isn’t your first rodeo. You’ve seen your share of economic and business cycles over your 32-year career. An expanding economy clearly has put some power behind growth stocks. What happens when economic activity slows?....MORE
Lawrence: Let me first say that we do not expect a recession in the U.S. over the next 12 months. Despite elevated levels of market volatility and geopolitical risk, our base case is for a slower but steady economic backdrop in the U.S., benign inflation, and accommodative policy ― all of which can continue to provide a supportive environment for U.S. companies.
So we’re actually optimistic as active growth investors.
Martin: What fuels your optimism?
