The technology sector is one of the best-performing groups this year, but that doesn’t mean investors shouldn’t consider hedging long bets on the largest sector weight in the S&P 500. The ProShares Short QQQ (PSQ) is an ideal ETF with which to accomplish that objective.
This short ProShares ETF seeks a return that is -1x the return of its underlying benchmark (target) for a single day, as measured from one NAV calculation to the next. Due to the compounding of daily returns, ProShares’ returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. These effects may be more pronounced in funds with larger or inverse multiples and in funds with volatile benchmarks. Investors should monitor their holdings as frequently as daily.
In other words, PSQ is an ideal short-term hedge for investors holding long positions in the Invesco QQQ Trust (NASDAQ: QQQ) or stocks such as Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT).
“PSQ isn’t a leveraged ETF, which expands its potential audience, because leveraged ETFs aren’t intended for all investors. And because it’s not a leveraged fund, PSQ can be held for longer periods than geared equivalents,” reports InvestorPlace.
What The Index Reflects
The Nasdaq-100 Index includes 100 of the largest domestic and international non-financial companies listed on The Nasdaq Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade, and biotechnology. It does not contain securities of financial companies including investment companies.
For most of the over decade-long bull market rally, investors have favored shares of rapidly growing, relatively pricey companies over their more low-valued counterparts, the Wall Street Journal reports.
The tech gains came despite concerns like controversies over how big tech companies have handled user data, antitrust hearings on Capitol Hill and U.S.-China trade tariffs targeting consumer devices. The sector strength reflects the continued confidence that technology companies will be able to keep delivering strong sales and earnings growth even if the broader economy shows signs of cooling off.
“There are no guarantees the following scenario materializes, but if markets weaken in a significant fashion, many of the high-flying growth (technology and internet) names that dominate the Nasdaq-100 would be among the first to be hit,” according to InvestorPlace. “Bottom line: PSQ is a fine hedge for investors with long exposure to tech ETFs or individual tech stars like Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT).”
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.