After the sharp pullback with the Nasdaq Composite dipping into a correction, ETF investors are betting on a quick rebound in this year’s technology-focused Nasdaq-100 play.
The popular triple-leveraged ProShares UltraPro QQQ (NasdaqGM: TQQQ) is on pace for one of its best weeks of new creations as it attracts close to $1.5 billion in net inflows over the past week. The bullish play also stands as a stark contrast to the ongoing redemptions in the more popularly watched Invesco QQQ Trust (NASDAQ: QQQ), which continued to see $555 million in net outflows in the past week.
The ProShares UltraPro QQQ tries to reflect the daily investment results that correspond to three times or 300% of the daily performance of the NASDAQ-100 Index. The fund invests in financial instruments that ProShare Advisors believes, in combination, should produce daily returns consistent with the fund’s investment objective. The index includes 100 of the largest domestic and international non-financial companies listed on The Nasdaq Stock Market based on market capitalization.
Traders have piled on to the mega-cap technology trade this year as many looked to companies with solid balance sheets and those that benefited the most from the new stay-at-home economy, which included technology names. The underlying Nasdaq-100 includes heavy tilts toward many prominent names in the new stuck-at-home space, including Microsoft, Apple, Amazon, and Google’s Alphabet.
“When I see selling in the marketplace, I ask myself: ‘Where else are these investors going to park their money?’” Dev Kantesaria, a managing partner at Valley Forge Capital Management, told the Wall Street Journal. “If you’re a long-term investor, you should be buying these growth stocks.”
However, some still warn of the elevated valuations in the equities market after the record run up.
“Those quick to pronounce the move off March lows as a new bull market have been proven correct with new S&P 500 all-time highs,” Ramsey, the firm’s chief investment officer, said in a note to clients, according to CNBC. “Fundamentally, though, there’s enormous risk in Large Cap valuations, regardless of where one believes we are in the economic cycle.”
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