The outlook for the second half of the year is becoming clearer as we move forward. The first half was focused on the possibility of interest rate cuts, with the Bank of Canada making a cut in June while the U.S. Fed held back. However, rate cuts are expected in the next six months, providing some assurance that debt levels will not worsen from this point onwards. As we stand on the brink of this turnaround, the question arises: which is a better buy – passive income plays or growth stocks?
Prolonged high interest rates could hinder the recovery of high-leverage dividend stocks as they have to deal with interest payments. On the other hand, growth stocks are poised to expand and meet consumer demand, typically having lower debt levels than dividend stocks.
A decrease in interest rates will benefit growth stocks, as it could lead to increased business activity and consumer demand, especially with the holiday season approaching. This shift may also guide investors towards the stock market in search of better returns. Tech stocks, in particular, are expected to perform well as they generally have lower leverage.
Shopify (TSX:SHOP) is likely to experience a seasonal surge in November and December as holiday shopping kicks off. The company’s share price has already seen a 15% increase in June following the Bank of Canada’s rate cut. Another growth stock worth considering is Advanced Micro Devices (NASDAQ:AMD), which is making strides in the AI game and stands as a strong competitor to Nvidia and Intel.
Investing in turnaround stocks like Magna International (TSX:MG), which is currently trading at a multi-year low, could also prove beneficial. The company is waiting for economic recovery and increased demand for electric vehicles to drive its growth.
In conclusion, while growth stocks like Shopify and Advanced Micro Devices offer promising opportunities, investing in turnaround stocks like Magna International could also yield significant returns. It is essential to consider all factors before making investment decisions in the current market scenario.