Experienced investors know that growth stocks can be sector agnostic. However, they often hail from two sectors: communication services and technology.
The expansive landscape of large-cap growth index funds and exchange traded funds reflects as much. For example, the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM), both of which track the Nasdaq-100 Index (NDX), are heavy on stocks from those two sectors. Technology and communication service names account for 49.61% and 16.28%, respectively, of those ETFs’ rosters.
Only one other sector, consumer discretionary, commands a double-digit allocation in QQQ and QQQM. This confirms that tech and communication services stocks chart the course for these ETFs’ performance. Fortunately, the 2025 outlook for those groups is broadly constructive.
Why QQQ Can Extend Gains in 2025
With just a few weeks left in 2024, it’s impossible to quibble with the performance offered by QQQ and QQQM. The ETFs are up 28.56% year-to-date. On the surface, that might imply a 2025 sequel could be hard to deliver, but it’s not impossible.
When it comes to communication services, which Charles Schwab rated “outperform,” the wide moats of Meta Platforms (META) and Alphabet (GOOG) could again benefit QQQ/QQQM in 2025, but there’s potential for some regulatory risk.
“The sector may underperform if economic growth slows. A persistent risk is the dominance of bigger members, which command a large share of the sector’s market cap and thus determine much of its performance,” noted Schwab.
