After a tumultuous August, September has been a sweet surprise for the global market. First, there was news that the United States and China will hold talks over trade in October. President Donald Trump has also said that he might consider an interim China trade deal.
If this was not enough, the European Central Bank (ECB) slashed its main deposit rate by 10 basis points to a negative 0.5%, a record low but on par with market expectations. The ECB will also be launching a quantitative easing (QE) program from Nov 1. The QE program will call for asset purchases worth 20 billion euros per month for as long as the economy needs. This marks the second round of QE from the ECB, the first occurring four years ago (read: ECB May Cut Rates in September: ETFs in Focus).
Not only the ECB, central banks in New Zealand, India, Thailand, South Korea, Turkey, Indonesia and South Africa resorted to rate cuts in order to keep signs of a slowdown at bay. All of these should perk up activities in the coming days to some extent (read: Play Global Bond ETFs to Join Central Banks' Rate Cut Euphoria).
Though trade uncertainty and growth concerns will not fade away completely in the coming days, any relief, however, should alleviate some concerns in the near term. Though trade tensions should remain more-or-less in the coming year, some signs of progress in the relationship spell good for the market.
Additionally, the Fed meeting, which is going to start in mid-September, is expected to end on a dovish note. At the current level, according to CME FedWatch tool, there is aan 88.8% chance of a 25-bp rate cut in the September meeting.
Also, investors should note that while U.S. manufacturing and housing data point toward a slowdown early in the third quarter, strong consumer spending alleviated concerns about a recession. “While other parts of the economy may show some weakening, consumers have remained confident and willing to spend,” said Lynn Franco, senior director of economic indicators at the Conference Board (read: ETFs to Buy as Americans' Confidence Nears 19-Year High).
Also, manufacturing now makes up about 12% of GDP, 15% of capex, and less than 9% of payrolls, said Pantheon Macroeconomics’ Ian Shepherdson. Per economists, the U.S. economy has changed itself from being manufacturing-driven one to services-oriented one. The ISM Non-Manufacturing PMI for the United States rose to 56.4 in August 2019, rebounding from a three-year low of 53.7 in the previous month and beating market consensus of 54 (read: U.S. Manufacturing Shrinks: Sector ETFs That Grew).
Why Large-Cap Growth ETFs?
Since large-cap stocks have considerable global exposure, broad-based global policy easing should provide some support. However, the earnings picture for large-cap U.S. companies is better than that of small-cap ones.
Against this backdrop, one can bet on the top-ranked large-cap growth ETFs mentioned below.
Vanguard Mega Cap Growth Index Fund ETF Shares (MGK - Free Report) — Zacks Rank #1 (Strong Buy)
iShares Morningstar Large-Cap Growth ETF (JKE - Free Report) ) — Zacks Rank #2 (Buy)
SPDR Portfolio S&P 500 Growth ETF (SPYG - Free Report) ) — Zacks Rank #1
iShares Russell Top 200 Growth ETF (IWY - Free Report) ) — Zacks Rank #1
Schwab U.S. Large-Cap Growth ETF (SCHG - Free Report) ) — Zacks Rank #2
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