Growth Stocks are back in favor

[dan_s]

Investors should favor growth stocks over value stocks as normalcy returns to
the market, according to Ned Davis Research.

The Cboe Volatility Index (VIX) traded at around 17 on Thursday, far below the
April 7 peak of 60.13. Heightened trade tensions sent the VIX surging in early
April and the S&P 500 tumbling, with investors worried that higher tariffs
would tip the economy into a recession.

Since then, stocks have recovered sharply as President Donald Trump paused
many of the levies unveiled on April 2. The S&P 500 is about 3% below its
all-time high set in February.

With these changes, Ned Davis thinks growth stocks — which trade on the
expectation of strong earnings expansion over several years — should hold a
more prominent spot in investor portfolios.

"We are moving 5% from bonds to stocks in our U.S. asset allocation
recommendation, bringing the weights to 60% stocks (5% overweight), 30% bonds
(5% underweight), and 10% cash (marketweight). We are also shifting our style
recommendation from neutral to favoring Growth over Value," Ed Clissold, the
Ned Davis chief U.S. strategist, wrote in a note Wednesday.

"At the beginning of the year, Mag 7 stocks, which tend to be classified as
Growth, were facing slower earnings growth and high valuations. The correction
removed Mag 7's relative overvaluation," he added.

Most "Magnificent Seven" stocks were under pressure at the height of the
tariff scare. Since then, most have staged strong rebounds. Take a look at the
group's performance since April 2.

* Nvidia: +29%

* Meta Platforms: +18%

* Amazon: +6%

* Alphabet: +7%

* Apple: +9%

* Tesla: +17%

* Microsoft: +21%

Still, Clissold warned: "One Truth Social post could change how investors feel
[toward] risk-on and riskoff assets. The NDR Daily Trading Sentiment
Composite, which is in the U.S. [Asset Allocation] Model, is neutral but close
to its excessive optimism zone. The implication is that the market is more
susceptible to the next piece of negative news."

[dan_s]

This should be good news for our Sweet 16 and Small-Cap Growth Portfolio stocks, which, in addition to strong growth potential, are also very cheap compared to my current valuations.

The combined FEARs of the "Trump Tariff War" and "What will OPEC+ do next?" remain a headwind for the oil price.

The outlook for U.S. natural gas prices is much brighter.