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Nasdaq ETFs Log Best Quarter Since 2020: What Lies Ahead?
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The Nasdaq was up 16.77% in the first quarter in 2023. It marked the best quarter since 2020 for the tech-heavy Nasdaq. In fact, the Nasdaq composite has witnessed its fastest start to a new year since 2019.
The index received a fillip from cooling signs of inflation, the resultant expectations of a less-hawkish Fed in the coming days and the ongoing global market uncertainty due to the recent banking crisis in the United States and Europe.
Nasdaq Composite’s performance is primarily linked to the movement of interest rate. The risk-off trade sentiments dragged down bond yields, which in turn benefitted, the high-growth tech-heavy Nasdaq Index. Notably, the Nasdaq Composite was the best performer in pandemic-ridden 2020 and 2021 as the Fed kept the benchmark interest rate to almost zero but nosedived in 2022 due to the spike in rates.
The Nasdaq index, has specifically, added gains in January and March. Tech stocks were the big winner in March as investors rotated out of financials due to the banking turmoil. The recent rally is “helping to confirm the market’s perception that the problems that brought the market to a crisis of confidence could very well be contained,” said Quincy Krosby, chief global strategist for LPL Financial, as quoted on CNBC.
Fidelity Nasdaq Composite Index ETF (ONEQ - Free Report) (up 15.3%), Invesco QQQ Trust (QQQ - Free Report) (up 18.7%), Invesco NASDAQ 100 ETF (QQQM - Free Report) (up 18.8%), Simplify Exchange Traded Funds Simplify Nasdaq 100 PLUS Downside Convexity ETF (up 18.6%), Simplify Nasdaq 100 PLUS Convexity ETF (up 18.9%) are some of the winning Nasdaq ETFs of the first quarter of 2023.
What Lies Ahead?
After last year’s bloodbath, the Nasdaq Index is undervalued. The Nasdaq has P/E of 24.26X, as of Mar 31, 2023. In Contrast, the S&P 500has a P/E of 19.17X. The Nasdaq’s maximum P/E in the last five year’s phase is 34.28X hit in Dec 2019 while the Median P/E is 26.15X touched in Apr 2021, per ycharts.com.
Investors should note that the Nasdaq ETFs are likely to possess much higher P/E ratios than the S&P 500 as the underlying stocks of the Nasdaq are high-growth in nature. Given the above numbers and comparison of QQQ with the blend ETF SPY, we can say that QQQ is not extremely richly-valued at the current level. Hence, the Nasdaq has further room to grow.
As far as the macroeconomic environment is concerned, the inflation is showing signs of easing. The labor market is cooling. The regional banking crisis has every chance of adopting an easy-going attitude for the Federal Reserve in the coming days. The rates are likely to remain subdued in the coming days – a huge tailwind for the index.
The tech sector that the Nasdaq is rich with has been on the cost-cutting mode through huge layoffs. Amazon, Meta, Alphabet, Twitter, Salesforce, video-sharing outlet Vimeo, communications technology firm Zoom, the digital fashion platform Stitch Fix – most of the tech giants have been on layoff spree. Hence, the sector’s profitability is bound to improve. Overall, we expect the Nasdaq to continue its run, if the economic situation remains unchanged.
Agreed, recessionary threats in the United States have been firming its grip and a rotation away from growth shares could be noticed. But we should not forget that the Nasdaq is tech-heavy and the lure of tech stocks will be alive over the long term as companies from various sectors are increasingly focusing on automation. For example, most recently Walmart said automation in stores, warehouses will increase sales by $130 billion over five years.
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Nasdaq ETFs Log Best Quarter Since 2020: What Lies Ahead?
The Nasdaq was up 16.77% in the first quarter in 2023. It marked the best quarter since 2020 for the tech-heavy Nasdaq. In fact, the Nasdaq composite has witnessed its fastest start to a new year since 2019.
The index received a fillip from cooling signs of inflation, the resultant expectations of a less-hawkish Fed in the coming days and the ongoing global market uncertainty due to the recent banking crisis in the United States and Europe.
Nasdaq Composite’s performance is primarily linked to the movement of interest rate. The risk-off trade sentiments dragged down bond yields, which in turn benefitted, the high-growth tech-heavy Nasdaq Index. Notably, the Nasdaq Composite was the best performer in pandemic-ridden 2020 and 2021 as the Fed kept the benchmark interest rate to almost zero but nosedived in 2022 due to the spike in rates.
The Nasdaq index, has specifically, added gains in January and March. Tech stocks were the big winner in March as investors rotated out of financials due to the banking turmoil. The recent rally is “helping to confirm the market’s perception that the problems that brought the market to a crisis of confidence could very well be contained,” said Quincy Krosby, chief global strategist for LPL Financial, as quoted on CNBC.
Fidelity Nasdaq Composite Index ETF (ONEQ - Free Report) (up 15.3%), Invesco QQQ Trust (QQQ - Free Report) (up 18.7%), Invesco NASDAQ 100 ETF (QQQM - Free Report) (up 18.8%), Simplify Exchange Traded Funds Simplify Nasdaq 100 PLUS Downside Convexity ETF (up 18.6%), Simplify Nasdaq 100 PLUS Convexity ETF (up 18.9%) are some of the winning Nasdaq ETFs of the first quarter of 2023.
What Lies Ahead?
After last year’s bloodbath, the Nasdaq Index is undervalued. The Nasdaq has P/E of 24.26X, as of Mar 31, 2023. In Contrast, the S&P 500has a P/E of 19.17X. The Nasdaq’s maximum P/E in the last five year’s phase is 34.28X hit in Dec 2019 while the Median P/E is 26.15X touched in Apr 2021, per ycharts.com.
Investors should note that the Nasdaq ETFs are likely to possess much higher P/E ratios than the S&P 500 as the underlying stocks of the Nasdaq are high-growth in nature. Given the above numbers and comparison of QQQ with the blend ETF SPY, we can say that QQQ is not extremely richly-valued at the current level. Hence, the Nasdaq has further room to grow.
As far as the macroeconomic environment is concerned, the inflation is showing signs of easing. The labor market is cooling. The regional banking crisis has every chance of adopting an easy-going attitude for the Federal Reserve in the coming days. The rates are likely to remain subdued in the coming days – a huge tailwind for the index.
The tech sector that the Nasdaq is rich with has been on the cost-cutting mode through huge layoffs. Amazon, Meta, Alphabet, Twitter, Salesforce, video-sharing outlet Vimeo, communications technology firm Zoom, the digital fashion platform Stitch Fix – most of the tech giants have been on layoff spree. Hence, the sector’s profitability is bound to improve. Overall, we expect the Nasdaq to continue its run, if the economic situation remains unchanged.
Agreed, recessionary threats in the United States have been firming its grip and a rotation away from growth shares could be noticed. But we should not forget that the Nasdaq is tech-heavy and the lure of tech stocks will be alive over the long term as companies from various sectors are increasingly focusing on automation. For example, most recently Walmart said automation in stores, warehouses will increase sales by $130 billion over five years.