Growth stocks refer to those high quality stocks that are likely to witness revenue and earnings increasing at a faster rate than the industry average. This is basically a momentum play and a great strategy in a trending market (a market characterized by a prolonged uptrend). In such a scenario, when broader market sentiments have a predetermined positive direction, there is hardly any strategy as gainful as growth investing. This is much higher than the expected earnings decline of 2.1% in 2016 and 1% decline recorded in 2015 (read: 5 ETF Investment Ideas for 2017). If these aren’t enough, earnings for the S&P 500 are expected to return to double-digit growth of 12.1% in 2017.
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On the other hand, the historic OPEC oil output cut deal could end the two-year crude-oil rout and stabilize the oil market, infusing fresh optimism into the energy sector. companies with excess cash and earnings growth, resulting in a stock market rally in the months ahead. In particular, Trump’s promise to accelerate economic growth, increase inflation, spend big on infrastructure, reduce regulations, cut taxes and create more jobs in the country have instilled strong confidence in the market. Additionally, the combination of other factors like return to the earnings growth era, the jump in oil price, Trump’s pro-growth policies and the rise in interest rates have added to the strength. Americans have an optimistic view about the economy with confidence hitting the highest level since 2001. economy is clearly on solid footing thanks to an impressive labor market, rising wages, slowly rising inflation and increasing consumer spending. This outperformance is likely to continue for the rest of the year (read: Large-Cap Growth ETFs Warming Up This Winter). In fact, most of the growth stocks and ETFs are hitting all-time highs this year. This is especially true as the ultra-popular growth fund QQQ climbed 3.5% in the first few trading sessions compared with gains of 0.4% for the value fund IWD and 1.3% for the core fund SPY. While the rally has been broad-based, growth stocks are easily leading the way to start the year.
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stocks has continued into 2017, that too with huge optimism.