Election Day Won't Dent Tech Thesis | ETF Trends

Technology is one of the best-performing sectors this year and some market observers believe investors shouldn’t fret about how the results of Election Day will affect the sector.

The First Trust Nasdaq-100 Tech Index (NasdaqGM: QTEC), which tracks the NASDAQ-100 Technology Sector Index, is one way for investors to position in technology stocks in preparation of a rally into year end. However, investors should be aware of various outcomes and the potential impacts ahead for the juggernaut tech sector.

“The tech sector – which has led the market in 2020 – is also in the spotlight. Concerns around data privacy and market power make tech regulation an area of growing bipartisan concern. Yet a Biden administration would likely bring more strenuous anti-trust reviews, including around issues such as wages and platform power,” according to BlackRock research.

QTEC is an equal-weight ETF, so it’s dominated by the likes of Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT).

QTEC: A Steady Idea

QTEC’s underlying “index consists of companies in the NASDAQ-100 Index classified as Technology according to Industry Classification Benchmark (ICB),” according to First Trust. “The index is reconstituted once a year based on the NASDAQ-100 reconstitution in December, but replacements may be made during the year if there is a replacement in the NASDAQ-100 Index.”

Covid-19 will continue to force us to adapt to a new normal where technology plays an even larger part in our lives as social distancing measures continue amid the pandemic. As such, exchange-traded fund (ETF) investors looking for either short- or long-term opportunities can keep on riding the technology wave.

While there are potential political headwinds looming for tech stocks, those issues are likely manageable. Plus, those problems could be offset by increased spending on renewable energy, a theme many tech names are favorably exposed to.

“We view the regulatory risks faced by mega-cap tech companies as manageable overall, as many have already adjusted to tougher data privacy rules in Europe. We see potential for leadership within the sector to broaden to a wider set of beneficiaries across different themes including 5G connectivity. Software and semiconductors could lead the charge, as they face fewer regulatory risks and enjoy long-term growth trends. Some tech companies could also benefit from the clean energy transition and a shift toward greater energy efficiency,” according to BlackRock.

For more on innovative portfolio ideas, visit our Nasdaq Portfolio Solutions Channel.

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.

Nasdaq Resources & Reports