The technology sector’s recent bull run is lifting Nasdaq-related exchange traded funds to new highs and some traders believe that trend can continue such as the Technology Select Sector SPDR (NYSEArca: XLK) and broad market ETFs like the PowerShares QQQ (NasdaqGM: QQQ), which tracks the tech heavy Nasdaq-100 Index, have recently been in rally mode and some market observers do not see the party ending in the near-term.
Recent ebullience towards tech ETFs is represents a rapid reversal of fortune. Just a few weeks ago, investors were worried about the impact Brexit could have on technology, the S&P 500’s largest sector allocation.Speculation that Great Britain’s decision to depart the European Union could weigh on technology stocks comes just a few weeks after chip stocks and ETFs started showing signs of leadership.
QQQ, one of the largest U.S. ETFs, has equal-weight equivalents equal-weight equivalents such as the Direxion NASDAQ-100 Equal Weighted Index Shares (NYSEArca: QQQE) and the First Trust NASDAQ-100 Equal Weighted Index Fund (NasdaqGS: QQEW).
Reports CNBC: “We’ve now got the Dow, we’ve got the S&P and now we’ve got the Nasdaq making all-time new highs,” Piper Jaffray technical analyst Craig Johnson said Tuesday on CNBC’s “Power Lunch,” referring to each major index hitting new all-time highs in recent weeks.”[related_stories]
Of course, QQQ will need help from Apple, Microsoft and the so-called FANG stocks – Facebook (NasdaqGS: FB), Amazon (NasdaqGS: AMZN), Netflix (NasdaqGS: NFLX) and Google (GOOGL) to bounce back because the traditional Nasdaq-100 is heavily allocated to those names.
However, old guard tech names that pay dividends such as Microsoft (NasdaqGS: MSFT) and Cisco Systems (NasdaqGS: CSCO) are helping drive the sector higher this year.
Traditionally, tech companies have not considered paying back their investors. Instead, many firms opted to reinvest cash back into the company or buy back stocks.
The Fidelity NASDAQ Composite Index ETF (NasdaqGM: ONEQ) deserves a place in the conversation. After all, ONEQ is the Nasdaq Composite tracking ETF. That means ONEQ offers a much deeper bench than Nasdaq-100 ETFs as the Fidelity offering is home to 1,924 stocks and does not exclude financial services names as do its Nasdaq-100 rivals.
For more information on technology ETFs, visit our Technology category.
Tom Lydon’s clients own shares of QQQ.