Since the pandemic, higher interest rates have made borrowing more expensive and impacted the value of growth stocks. But things are shifting again. Last week, the US Federal Reserve cut rates by 25 basis points, signalling the start of a looser policy environment.
That could make the growth narrative far more attractive. When interest rates rise, the present value of future earnings decreases, but when rates fall, the opposite occurs.
In other words, the Fed’s move could give growth stocks fresh momentum — and the FTSE 100 isn’t short of companies with strong exposure to international markets.
Spirax Group
Spirax Group (LSE: SPX) is a fascinating case study. The company provides industrial and commercial steam systems, electrical thermal energy solutions and niche peristaltic pumps. In 2022, it acquired Durex International Corporation, a US-based specialist in electric thermal solutions.
Between 2010 and 2020, the stock made spectacular gains, but since the pandemic, it’s struggled, sitting 34% lower over the past five years.
However, a mild recovery has already begun, and a low-interest-rate environment could provide the extra boost it needs. In August’s results, the company forecast faster second-half sales growth thanks to a strong order book, following a better-than-expected rise in the first half. This was an encouraging turnaround, especially after earlier warnings about order delays and lower demand in China and South Korea. It’s also outlined steps to counter tariffs, which could ease concerns about international headwinds.
Broker CFRA recently raised the stock to a Buy, lifting its price target by about 20%. That kind of analyst confidence is a sign that the market could be re-rating Spirax’s potential.
But risks remain. Any slowdown in global industrial demand or renewed weakness in Asian markets could weigh heavily on performance. Investors need to weigh up whether the strong fundamentals and history of growth are enough to offset those uncertainties.
JD Sports
Then there’s JD Sports (LSE: JD). The retailer has built its reputation on rapid international expansion, yet the shares have suffered recently, down 42% since late 2020. Consumer weakness has been a big part of the story.
Now, the stock looks attractive from a valuation perspective. With a forward price-to-earnings (P/E) ratio of 7.4, it appears cheap compared to the earnings forecasts. The company has guided for fiscal 2026 adjusted pre-tax profit in line with market consensus at around £885m, with about £350m expected for the first half. Analysts expect a 2% decline in like-for-like sales in upcoming results, but project a recovery after that.
The risk here is competition. The sportswear market is fiercely contested, and JD can’t afford a slip-up in execution. Margins could also come under pressure if pricing wars intensify.
Overall, I think it’s a stock worth considering for value investors looking for exposure to fresh growth potential in the retail sector.
Eyeing long-term growth
So are growth stocks back in fashion? I think there’s a strong case. The Fed’s rate cut could signal a friendlier environment for businesses focused on expansion rather than income.
While it’s never wise to simply chase the hottest names, I reckon it’s worth weighing up embattled companies like Spirax and JD. Both showing signs of recovery, they could help bolster the growth potential of a long-term portfolio.
