Are markets swinging back towards tech? The latest Fed meeting and 25 basis point hike, combined with the S&P 500 up 9% over the last month, suggest that the central bank may be getting closer to pulling off a “soft landing.” Should tech continue to bounce back, recently hitting its best level since August, an equal-weight cloud computing ETF like the WisdomTree Cloud Computing Fund (WCLD) is a notable strategy to watch, having recently hit a technical buy signal.
Yes, some of the bigger tech names have had a rough week in earnings, with Apple (AAPL), Amazon (AMZN), and Alphabet (GOOGL) all seeing disappointing quarterly results. Cloud computing can ride some exciting advancements like hybrid and multi-cloud management, cloud security, cost management, and more, while also benefitting from solid demand even in a recession.
Those factors underscore a recent upswing for WCLD. The equal-weight cloud computing ETF sat at $31.2 at press time Friday, well above its 200-Day Simple Moving Average (SMA) of $28.5 and even further above $25.8, its 50-Day SMA. Should it keep its momentum, it may also push into golden crossover territory – a vindication of investor interest in the space.
WCLD tracks the BVP Nasdaq Emerging Cloud Index primarily focused on cloud software, with stocks equal weighted in the index. The strategy includes firms in its index should those firms must have a revenue growth rate of at least 15% for the last two full fiscal years for new constituents or a growth rate of at least 7% in at least one of the last two fiscal years for existing constituents.
That screen has helped it to outperform its ETF Database Category Average and its Factset Segment Average over the last month, returning 25.6% compared to 23.6% and 22.2% respectively in that time. It has also added $3 million in one-month net inflows, charging 45 basis points for its exposures.
Cloud computing represents an interesting prospect in the tech space right now, one that may be less top-heavy than the mega-cap tech names out there. For investors looking for a strategy that could appeal in a slight tech upswing environment, WCLD may be one to watch.
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