Positivity May Emerge for Nasdaq-100 ETFs
OFollowing a decent but unspectacular jobs report in May, stocks fell last Friday, and the Nasdaq-100 (NDX) index was not immune to this weakness.
Still, some market watchers believe that NDX may be on course to improve in the second half of 2022, and that could justify the rating of exchange-traded funds such as the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM).
Both of these funds track the NDX. The main difference between the two is that the smaller QQQM is geared more towards long-term investors, as highlighted by an annual fee of 0.15%, or $15 on a $10,000 investment. This compares to an annual expense ratio of 0.20% on the old QQQ.
QQQ is the preferred avenue for institutional players and professional traders due to deep liquidity, tight spreads and a robust options market. Speaking of the options market, it could offer clues to the near-term fate of the Nasdaq-100 index.
“Regardless of the long-term outlook, if you’re at least short-term bullish, there are several tech names within QQQ that may be worth posting. In the leading quantitative analyst’s latest indicator of the week from Schaeffer, Rocky White, it identifies the 25 best performing stocks on the S&P 500 Index (SPX) over the past 10 years. Eight stocks on this list are part of QQQ’s holdings,” according to Schaeffer Investment Research.
QQQ and QQQM have been under stress this year as rising inflation is among the factors affecting growth stocks. However, if the consumer price index (CPI) shows signs of easing from four-decade highs, some investors may be forced to revisit growth stocks – the main constituency of QQQ and QQQM.
“Peak inflation may be in the rearview mirror, but it will always be ‘higher for longer.’ those nervous investors, we want to remind them that buying options instead of stocks puts fewer dollars at risk versus stocks, to maximize your ability to profit in the face of a continued upside,” added Schaeffer.
As growth and tech stocks struggle this year due to rising interest rates, there are signs that long-term investors are seeing value in these assets or are willing to be patient. For example, investors have added $1.36 billion in new capital to QQQM since the start of the year, as of June 2.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.