The past two days not withstanding, stocks have been on a roll over the past month, and that’s encouraging some market participants to ratchet up positive expectations.
Obviously, a slew of equity-based exchange traded funds stand to benefit from that trend, including the Invesco NASDAQ Next Gen 100 ETF (QQQJ). As highlighted by a 6% gain over the past month, QQQJ is already participating in increasing equity market ebullience.
The $1.27 billion QQQJ tracks the NASDAQ Next Generation 100 Index, which is basically the proving ground for the widely observed NASDAQ-100 Index (NDX). The 104 stocks in QQQJ are the names with the best chances of being elevated to NDX in the future. Additionally, the Invesco fund is an ideal avenue for participating in equity market upside, which is something that plenty of investors are banking on.
“US equity investor risk appetite improved for a second month running in November, rising to the highest since April. Expectations of near-term returns meanwhile hit a new high, fueled by improved prospects for earnings, equity fundamentals and shareholder returns, as well as brighter outlooks for macro and policy factors,” according to IHS Markit.
Like NDX, QQQJ is tech-heavy as technology stocks account for 45.15% of the fund’s weight. The healthcare and consumer discretionary sectors combine for nearly a third of QQQJ’s roster.
“In terms of sector preferences, financials have retained the most-favored spot in November for a third successive month having seen the biggest positive shift in sentiment over the past year, followed by healthcare. However, it was tech stocks that enjoyed the largest upswing in favorability compared to October, with sentiment rising to the highest since February,” adds IHS Markit. “Economy hopes meanwhile lifted sentiment towards consumer discretionary, industrial and basic materials, though in some cases inflation and supply line worries continued to constrain appetite.”
And like NDX, QQQJ is chock full of growth stocks, meaning that it could prove durable if inflation continues running hot and economic growth slows, as is expected to happen in the fourth quarter and into 2022. Trade settlement data cited by IHS Markit may also provide some upside clues for QQQJ.
“We continue to see a significant correlation between the IMI survey results and the $21T in equity trading settlement data we track on a weekly basis. The positive sentiment upswing for tech has been led by hedge funds which reversed course and aggressively increased exposure after two consecutive weeks of selling. Meanwhile, healthcare stocks have benefited from both institutional and ETF inflows despite profit-taking by hedge funds,” according to the research firm.
QQQJ has an environmental, social, and governance (ESG) counterpart, the Invesco ESG NASDAQ Next Gen 100 ETF (QQJG).
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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.