Success in growth stocks does seem to follow market sentiment in a more volatile way than for income stocks.
Sometimes, investors are more open to growth stock opportunities. And other times, few people want to touch them.
For most of the past decade, even before Covid came along, the mood has been glum.
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Recession over?
But Bank of England (BoE) governor Andrew Bailey has said the UK’s recession might already be over. He added that, by historical standards, it’s “the weakest recession by a long way“.
He’s still hesitant over interest rates cuts. But they surely have to come soon.
If there’s economic growth on the cards, coupled with interest rate optimism, I reckon that could give stocks a boost. Specifically, I’m thinking of UK growth stocks, and I think some could be set for a new surge.
Top growth stock?
Rightmove (LSE: RMV) is one I think could see some nice growth when interest rates fall.
The Rightmove share price has suffered in the property slowdown. And that’s understandtable. But we’re looking at a modest rise of 11% in the past five years. And I think that shows the underlying resiliance of the business.
We’ve seen high-profile competion come and go. But in tough times, it’s those with core long-term strength that shine through. As the UK’s biggest property portal, I reckon Rightmove has that defensive strength.
Interest rates
Broker forecasts seem a bit cagey, with only modest growth predicted in the next couple of years. I expect they’re being cautious over interest rates, just like the BoE.
Mortgage lenders are more optimistic, though, and some have already cut their rates.
We might still have weakness for a while. It will surely take time, once rates fall, for it to feed through into the housing market to any great amount. So there’s risk for those who buy now.
But I think we could see a bright spell for Rightmove, and for the house builders themselves.
More growth stocks
I reckon the same factors could send some real estate investment trusts (REITs) heading upwards too.
High interest rates put a damper on Primary Health Properties. Its shares have been falling for the past few years. And that’s even though it gets its money from renting to the health market, which is strong.
Tritax Big Box shares have picked up a bit in 2024. But I think demand for logistics warehouses could give these, and shares in similar REITs, a boost.
The risks for REITs are similar to those for Rightmove and the builders, I’d say.
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Energy
Outside of those deeply affected by interest rates, I see plenty of renewable energy stocks have gone out of fashion.
Anything related to hydrogen storage, lithium production, battery technology… they were big boom businesses just a few years ago. In my view, people jumped on the bandwagon too soon, as often happens with tech-based stocks.
But these are all areas where we could see renewed growth kicking off in 2024. I really think it could be a good year.
