Wall Street has been on choppy ride since the start of 2022 due to rising rate worries. The 10-year U.S. Treasury yield soared to its highest point in two years on Jan 18, 2022, hovering around 1.87%. Rates have been rising in the United States on the Fed’s rate hike bets. Higher inflationary expectations emanating from supply chin disruptions as well as higher crude prices should make Fed members comfortable with rate hikes in the coming days.
The Nasdaq, heavy on technology and growth stocks,plunged 7.6% last week, marking in
its worst week since March 2020, while the S&P 500 (down 5.7%) and the Dow Jones (down 4.6%) also saw considerable losses. The Nasdaq Composite has lost 12% this year as investors continue to walk out of the high-growth tech shares as interest rates surge to start the new year. The index is now off more than 10% from its November record, ensuring the fact that it has entered the correction territory (read: Nasdaq in Correction: ETF Strategies to Play).
Since the growth sector relies on easy borrowing for superior growth and its value depends heavily on future earnings, a rise in long-term yields cuts the present value of companies’ future earnings. Apart from the rate issues, the economic reopening amid vaccination and easing Omicron concerns have been pushing investors away from stay-at-home tech stocks.
Bad news from two pandemic winners –
Peloton ( PTON Quick Quote PTON - Free Report) and Netflix ( NFLX Quick Quote NFLX - Free Report) – raised concerns about the sustainability of the stay-at-home tech stocks last week. Netflix expects to add a meager 2.5 million users in the current quarter, well below the estimates. Peloton, meanwhile, is cutting costs to tackle the falling demand for its stationary bikes. Cybersecurity ETFs Least-Hurt Last Week
The biggest tech ETF
Technology Select Sector SPDR ETF ( XLK Quick Quote XLK - Free Report) lost about 7% last week. Still, there were some tech ETFs that lost little last week, indicating their inherent strength in the ongoing market bloodbath. This tech investing area was cybersecurity.
As estimated by the research firm Gartner, global cybersecurity spending jumped 13% in 2021 to $172 billion versus 8% growth in 2020. In both 2022 and 2023, Gartner predicts 11% growth in cybersecurity spending, per an article published on investors.com.
Winning ETFs in Focus iShares Cybersecurity & Tech ETF ( IHAK Quick Quote IHAK - Free Report) – Down 1.1% Last Week
The underlying NYSE FactSet Global Cyber Security Index comprises developed and emerging market companies involved in cyber security and technology, including cyber security hardware, software, products and services. IHAK charges 55 bps in fees.
Global X Cybersecurity ETF ( BUG Quick Quote BUG - Free Report) – Down 1.2%
The underlying Indxx Cybersecurity Index is designed to provide exposure to exchange-listed companies that are positioned to benefit from the increased adoption of cybersecurity technology, including but not limited to companies whose principal business is in the development & management of security protocols preventing intrusion & attacks to systems, networks, applications, computers & mobile devices. BUG charges 50 bps in fees (read:
Why You Should Buy Cybersecurity ETFs). WisdomTree Cybersecurity Fund ( WCBR Quick Quote WCBR - Free Report) – Down 1.6%
The underlying WisdomTree Team8 Cybersecurity Index is designed to track the performance of companies primarily involved in providing cyber security-oriented products. WCBR charges 45 bps in fees.
First Trust NASDAQ Cybersecurity ETF ( CIBR Quick Quote CIBR - Free Report) – Down 1.7%
The underlying Nasdaq CTA Cybersecurity Index tracks the performance of companies engaged in the cybersecurity segment of the technology and industrials sectors. CIBR charges 60 bps in fees.