Experienced investors are familiar with the old financial markets saying: “Sell in May and go away.” While not always accurate from year to year, the message is simple. Equities often languish in the summer months. That underscores the point that the May-through-October stretch is the weaker of the two six-month periods for stocks.
While that advice works on occasion, there are plenty of instances in which selling in May is neither required nor rewarded. Take the cases of the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM). Those two funds, which have the same lineups, gained nearly 7% in May — a month that’s supposedly tricky for stocks.
It remains to be seen if the Nasdaq-100 Index-tracking ETFs can keep up that momentum as the calendar moves deeper into summer. But some market observers believe risk assets can continue delivering strong showings over the next several months. Technology, the largest sector weight in QQQ and QQQM, is expected to lead the charge.
As Temperatures Heat Up, So Can QQQ & QQQM
Expectations that global economic growth, led by the U.S. among developed markets, will remain solid over the remainder of 2024 is a primary reason some professional are constructive on equities. Should that outlook prove accurate, QQQ and QQQM could benefit.
“One of the primary drivers of the current bullish market sentiment is the expectation of sustained economic growth, despite this meaning that we expect global monetary policy to remain ‘higher-for-longer’ for the rest of the year,” noted deVere Group CEO Nigel Green. “Institutions like the International Monetary Fund (IMF) and Bloomberg have recently revised their global economic forecasts upwards, further fuelling investor confidence. This positive outlook is underpinned by strong economic indicators, particularly in the U.S.”
Green added that crucial factors such as consumer spending and corporate earnings remain supportive of equity market upside. Those issues are of particular importance to QQQ and QQQM for multiple reasons. First, the ETFs allocate 12.62% of their rosters to consumer cyclical stocks. Second, some market observers are fearful that many mega-cap growth stocks are richly valued. But rising earnings per share could allay those concerns.
Regarding the sector exposures of QQQ and QQQM, it’s worth noting that tech and consumer discretionary, — which combine for over 63% of the ETFs’ portfolios — typically hold up well in the summer months.
“Increased spending during the summer vacation season benefits the consumer discretionary sector. Travel, leisure, and retail companies typically see higher demand driven by seasonal activities and tourism,” concluded Green.
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