The last year was difficult for growth investing strategies as historically low-interest rates which led to some high-flying stocks without the earnings to support them. Capital Group believes that proven earnings growth will be the bigger driver of return going forward and that there is a wide range of options available.

“The fundamental tenet of buying companies whose return is going to come from generating superior growth over time still makes sense for long-term investors. You just need to be more selective today,” says Carl Kawaja, Equity Portfolio Manager at Capital Group.

Discussing its views on the growth investing market, Capital Group says that tech and consumer stocks have taken a beating in recent times but AI could be an inflection point. “The market may be overlooking continued strength in some well-positioned companies,” writes Martin Romo, Portfolio Manager, Capital Group.

AI is the next step in technological innovation and several large companies are already adopting these systems to enhance productivity. The hardware sector too stands to benefit as newer and more advanced infrastructure is necessary to bring about this evolution.

On the other hand, Cheryl Frank, Portfolio Manager, adds that investors should track capital flows in the key sector, which support investments across allied sectors. The asset manager gives examples of various companies and sectors which are seeing higher investments.

Meanwhile, Carl Kawaja adds that a weakening dollar may support companies outside the US.

“At some point, I believe the Federal Reserve will have to cut rates. And when that happens, I think we may see further dollar weakness. So I’m optimistic about the prospects for global investing,” says Kawaja. “Regardless of whether economies in Europe or Asia do well, there will be great companies in those regions with solid business prospects.”

View the complete insight here.