Inflation is clearly proving far more persistent than originally forecast, and at least over the near term, there’s little reason to think that this scenario will suddenly reverse for the better.
As advisors and investors well know, rising consumer and producer prices send market participants scurrying to asset classes known for inflation-fighting credentials. What some investors may not realize is that some beloved corners of the equity market can be durable when inflation soars. That includes large- and mega-cap tech stocks.
With that in mind, investors might want to evaluate exchange traded funds such as the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM), both of which track the Nasdaq-100 Index (NDX), over the near term.
“There are some technology stocks prepared to withstand inflationary pressures and benefit in the long-term, according to Baird. Earlier this month, the bank shared a list of tech stocks to help clients play the market. It included dozens of companies that dabble in industries like cloud software, semiconductors, the internet and gaming,” reports Samantha Subin for CNBC.
Baird analysts recently published a list of technology stocks that could prove durable amid high inflation, and that list turns up plenty of names residing in QQQ and QQQM. The list includes Apple (NASDAQ:AAPL), which accounts for more than 12% of QQQ and QQQM and is the largest holding in both ETFs.
Google parent Alphabet (NASDAQ:GOOG), the two share classes of which combine for 7.6% of those ETFs, is also on the Baird list.
“We still also see GOOGL as a relative ‘safe haven’ for investors with core search the bedrock of digital advertising and a ‘cost of sales’ for many advertisers,” according to the research firm.
Baird also sees inflation-fighting capabilities in semiconductor giants Nvidia (NASDAQ:NVDA) and Intel (NASDAQ:INTC). Those stocks combine for 5.65% of QQQ and QQQM.
“Another strong technology sector play is semiconductors like Intel and Nvidia, which can benefit from continued work-from-home trends, Baird said. Both stocks are down 7.9% and 9.1% this year, respectively. Baird gave Nvidia a price target of $360, and shares closed at $267.34 on Monday,” reports CNBC.
Other QQQ and QQQM member firms highlighted by Baird include Amazon (NASDAQ:AMZN) and video game publisher Electronic Arts (NASDAQ:EA). Amazon is the third-largest holding in both Invesco ETFs at a weight of 7.41%.
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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.