The late July/early August slump endured by major equity benchmarks now feels like a distant memory. However, the good news for investors who didn’t immediately buy the dip is that gauges such as the Nasdaq-100 Index (NDX) still have some work to do to reclaim their previously notched 52-week highs.
Recent price action by exchange traded funds such as the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM) indicates it could be just a matter of time before those old highs are reached and surpassed. Those two ETFs track the Nasdaq-100, which has been on a torrid pace since putting a near-term low on Aug. 5. For the week ending Aug. 21, NDX gained 4.27%.
A combination of momentum and market participants’ established affinity for various QQQ/QQQM holdings is sparking the ETFs. This fosters a rebound that’s all the more impressive when considering Election Day is just two-and-a-half months away. There are some factors to ponder regarding recent NDX momentum. They could bode well for more gains by the Invesco ETFs as 2024 enters its latter stages.
Why QQQ/QQQM Can Extend Recent Gains
Following the aforementioned late July/early August selloff, some companies used that opportunity to repurchase their own shares. This provides a spark for the rebound.
“Companies have been aggressively repurchasing their own shares, reducing the supply of stock available in the market and driving prices higher. This trend is expected to continue in the coming weeks, providing a solid foundation for further gains,” notes deVere Group CEO Nigel Green.
As it pertains to QQQ and QQQM, that’s a highly relevant catalyst because technology is the leading sector for share repurchases, and some of the ETFs’ marquee holdings, such as Apple (AAPL) and Microsoft (MSFT), are dedicated buyers of their own shares.
Then there are the familiar catalysts of interest rate cut speculation and fear of missing out (FOMO), both of which are supportive of QQQ/QQQM upside. It’s widely believed that the Federal Reserve will lower rates next month. This is relevant to QQQ/QQQM investors because growth stocks are rate-sensitive. As for FOMO, it might not be a fundamental factor in the traditional sense. Still, it’s pertinent as it relates to the QQQ/QQQM portfolios.
“Many investors who were previously cautious have found themselves underinvested in this rising market. This has led to a scramble to buy stocks and avoid missing out on further gains,” adds Green. “This FOMO – fear of missing out – has been a powerful driver of stock prices in recent weeks. At the same time, sellers seem to be running out of steam. Fewer investors are willing to bet against the market in the face of such strong momentum.”
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