Optimism over tax reform and higher chances of the plan being signed into the law this Christmas has acted as the latest catalyst to the second-largest bull market. A massive $1.4-trillion tax cut will create an economic surge, boosting job growth and reflation trade. It will further accelerate earnings, leading to increased dividend and buyback activities. Additionally, the tax repatriation will allow companies to bring the offshore cash back home, paving the way for increased mergers and acquisitions.

Apart from these, a combination of other factors like a rise in oil price and higher interest rates are fueling growth. All these events have raised the appeal of riskier assets. While the rally has been broad-based, growth stocks are easily leading the way. Notably, the ultra-popular growth fund QQQ has risen 33.9% since the start of the year compared with gains of 11.5% for the value fund (IWD – Free Report) and 20% for the core fund SPY.

This is especially true as growth investing is basically a momentum play and a great strategy in a trending market (a market characterized by a prolonged uptrend). Growth stocks refer to high-quality players that are likely to witness higher revenues and earnings at a faster rate than the industry average. These stocks harness their momentum in earnings to create a positive bias in the market, resulting in rocketing share prices. As such, growth funds tend to outperform during an uptrend.