The Nasdaq clocked double-digit gains for three years in a row in 2021. The Nasdaq Composite is up 20.4% this year (as of Dec 22, 2021), after 44% gains in 2020 and a 34.2% jump in 2019.
Invesco QQQ ( QQQ Quick Quote QQQ - Free Report) , Invesco NASDAQ 100 ETF ( QQQM Quick Quote QQQM - Free Report) , Invesco NASDAQ Next Gen 100 ETF ( QQQJ Quick Quote QQQJ - Free Report) , First Trust NASDAQ-100 Equal Weighted Index Fund ( QQEW Quick Quote QQEW - Free Report) and Fidelity Nasdaq Composite Index Tracking Stock ( ONEQ Quick Quote ONEQ - Free Report) have thus gained attention.
With the global markets still rebounding from a virus-related slump, another year of double-digit gains is highly likely for the Nasdaq. Agreed, the tech-heavy Nasdaq has lagged the S&P 500 (up 23.8% as of Dec 22, 2021) so far thanks to deeper focus of the former on growth stocks, which underperform in a rising-rate environment. As the Federal Reserve turned more hawkish and expectations for higher interest rates rose, investors rotated out of the high-growth technology sector.
Still, rising consumer spending on technology with coronavirus-induced social distancing will be leading to remote communication, a surge in e-commerce and online payments, stellar growth in the video-gaming segment, a 5G boom, and expectations of higher smartphone sales. These should continue to propel the tech and semiconductor spaces in 2022.
Let’s delve a little deeper:
New Strain of Coronavirus
There is a new strain of coronavirus called Omicron (which is much more infectious than the previous versions although not that fatal), which can charge up the tech space in 2022 all over again. The faster-spreading variant of the virus has been discovered in more places in the United States, and other parts of the globe. However, everything depends on the efficacy of the recently rolled out vaccines. If the vaccines fail to restrain the new strains of virus in the coming days, fears may flare up and the Nasdaq will again rule.
Digitization Taking the Spotlight
The touch of technology in business and health communications will be felt in 2022 too as uncertainties prevail. Moreover, with the global economy striving to bounce back from the virus-led slump, corporate and social efforts to save the cost structure will be a priority. Travels will likely be less in the post-COVID world and e-payments will gain precedence.
Biotechnology is another great area with genomics grabbing limelight. These two segments — tech and biotech — should continue to march ahead in 2022 with or without virus scare. Since the Nasdaq-100 has 70% focus on technology and about 5% exposure to biotech, 2022 has high chances of being a rewarding year for the index.
Plus, the Nasdaq-100 has about 16% focus on the Consumer Discretionary sector, which is in fine fettle currently thanks to a solid jobs market and higher pent-up demand. This cyclical sector also tends to perform well in a rising-rate environment.
In fact, the Nasdaq’s relatively restrained gains in 2021 may open up some great opportunities in early 2022. Against this backdrop, investors can very well play the Nasdaq ETFs right now.
ETFs in Focus Invesco QQQ ( QQQ Quick Quote QQQ - Free Report) – Zacks Rank #2 (Buy)
The underlying Nasdaq-100 Index includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization. The ETF charges 20 bps in fees.
Invesco NASDAQ 100 ETF ( QQQM Quick Quote QQQM - Free Report) – Zacks Rank #2
The underlying NASDAQ-100 Index includes securities of 100 of the largest domestic and international nonfinancial companies listed on Nasdaq. The ETF QQQM charges 15 bps in fees (read:
Guide to the Nasdaq ETF Investing). Invesco NASDAQ Next Gen 100 ETF (– Zacks Rank #2 QQQJ Quick Quote QQQJ - Free Report)
The underlying NASDAQ Next Generation 100 Index comprises securities of the next generation of the Nasdaq-listed non-financial companies; that is, the largest 100 Nasdaq-listed companies outside of the NASDAQ-100 Index. The ETF QQQJ charges 15 bps in fees.
First Trust NASDAQ-100 Equal Weighted Index Fund ( – Zacks Rank #2 QQEW Quick Quote QQEW - Free Report)
The underlying NASDAQ-100 Equal Weighted Index is the equal-weighted version of the NASDAQ-100 Index, which includes 100 of the largest non-financial securities listed on NASDAQ based on market capitalization. QQEW charges 58 bps in fees.
Fidelity Nasdaq Composite Index Tracking Stock ( – Zacks Rank #2 ONEQ Quick Quote ONEQ - Free Report)
This ETF tracks the Nasdaq Composite Index, holding a broad basket of about 1000 stocks. The expense ratio of ONEQ is 0.21%.