Back to top

Image: Shutterstock

Nasdaq Enters Bull Market: ETFs to Tap the Rally

Read MoreHide Full Article

After the worst first half in decades, Wall Street is showing strong momentum, with the tech-heavy Nasdaq Composite Index outperforming over the past month. The Nasdaq logged its longest-winning weekly streak since November, pushing the benchmark to a new bull market.  

Investors looking to ride the Nasdaq bulls could consider ETFs like Invesco QQQ (QQQ - Free Report) , Invesco NASDAQ 100 ETF (QQQM - Free Report) , First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW - Free Report) , Simplify Nasdaq 100 PLUS Convexity ETF (QQC - Free Report) , Fidelity Nasdaq Composite Index Tracking Stock (ONEQ - Free Report) , ProShares Ultra QQQ (QLD - Free Report) and ProShares UltraPro QQQ (TQQQ - Free Report) . These funds might see massive trading volumes in the days ahead, given the bullish fundamentals.

A slowdown in July inflation brought the much-needed relief to the stock market and perked up investor sentiment. The consumer price index jumped 8.5% year over year in July, down from a 9.1% year-over-year increase in June, which was the fastest increase since November 1981. This, coupled with recession fears, has spurred bets that the Fed could start lower the pace of rate hikes. The world's largest economy is poised for a technical recession as GDP shrank by 0.9% in the second quarter, followed by a 1.6% decline in the first quarter (read: Inflation Cools But Food Prices Up Since 1979: ETFs in Focus).

U.S. consumer sentiment improved in August from a record low earlier this summer. The University of Michigan’s preliminary sentiment index rose to a three-month high of 55.1 from 51.5 in July. Additionally, a drop in Treasury yields, which had led to a sharp sell-off in the tech sector, and declining commodity prices brought back the lure for tech stocks.

The recent spike in the Nasdaq ended its longest bear market since 2008 in the depths of the financial crisis. It is still down 18% this year but rallied more than 20% in 55 days.

Invesco QQQ (QQQ - Free Report)

Invesco QQQ provides exposure to the 102 largest domestic and international non-financial companies listed on the Nasdaq by tracking the Nasdaq 100 Index. Information technology accounts for 50.8% of the assets, while consumer discretionary and communication services make up for a 16.4% and 16.2% share, respectively.

Invesco QQQ is one of the largest and most-popular ETFs in the large-cap space, with AUM of $180.4 billion and an average daily volume of around 55 million shares. Invesco QQQ charges investors 20 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: 5 Best Stocks That Led the Rally in Nasdaq ETF).

Invesco NASDAQ 100 ETF (QQQM - Free Report)

Invesco NASDAQ 100 ETF is identical to QQQ tracking the NASDAQ-100 Index but comes with lower annual fees of 15 bps. It holds 104 securities in its basket, with a higher concentration on the top two firms.

Invesco NASDAQ 100 ETF has accumulated $5.5 billion in its asset base and trades in an average daily volume of 692,000 shares. It has a Zacks ETF Rank #3.

First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW - Free Report)
 
Holding 102 stocks, First Trust NASDAQ-100 Equal Weighted Index Fund provides equal exposure to stocks on the Nasdaq-100 Equal Weighted Index. It has amassed $1.2 billion in its asset base while trades in moderate volumes of nearly 68,000 shares a day on average.

First Trust NASDAQ-100 Equal Weighted Index Fund charges 57 bps in annual fees and trades in an average daily volume of 68,000 shares. QQEW carries a Zacks ETF Rank #3 with a Medium risk outlook.

Simplify Nasdaq 100 PLUS Convexity ETF (QQC - Free Report)

Simplify Nasdaq 100 PLUS Convexity ETF seeks to provide capital appreciation by tracking a basket of large-cap U.S. growth stocks while aiming to boost performance during extreme market moves up or down via a systematic options overlay. The fund’s core holding provides investors with Nasdaq 100 Index exposure.

Simplify Nasdaq 100 PLUS Convexity ETF has gathered $5.9 million in its asset base and charges 45 bps. It trades in a paltry average daily volume of about 2,000 shares.

Fidelity Nasdaq Composite Index Tracking Stock (ONEQ - Free Report)

Fidelity Nasdaq Composite Index Tracking Stock tracks the Nasdaq Composite Index, holding a broad basket of 1,013 stocks. Information technology accounts for 44.7% of the assets, while consumer discretionary and communication services make up for a 16.4% and 14% share, respectively.

Fidelity Nasdaq Composite Index Tracking Stock has AUM of $4.3 billion and an average daily volume of around 373,000 shares. It charges 21 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.

ProShares Ultra QQQ (QLD - Free Report)

Investors aiming to make big gains in a short span can bet on QLD. It provides twice the return of the NASDAQ-100 Index’s daily performance and exchanges 4.9 million shares in hand, on average. The fund has an AUM of $4.2 billion and charges 95 bps in fees and expenses.

ProShares UltraPro QQQ (TQQQ - Free Report)

For a more bullish approach, ProShares UltraPro QQQ could be an excellent choice. It also tracks the NASDAQ-100 Index but offers thrice the returns of its daily performance, with the same expense ratio of QLD (read: 10 Most-Heavily Traded ETFs of Q2).

ProShares UltraPro QQQ amassed $15.7 billion in AUM and trades in a heavy volume of 162 million shares, on average. It charges 95 bps in annual fees.