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Can Nasdaq ETFs Maintain Their Awesome 1H Rally in 2H?
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After an awful 2022, Wall Street experienced a rebound in the first half of 2023. This recovery was aided by growth stocks, particularly in the technology sector. The tech-heavy Nasdaq Composite Index played a key role in reigniting the U.S. stock markets. In fact, the Nasdaq had its best first half in 2023, having gained about 31.7%.
Consistent Growth Throughout the First Half
The Nasdaq's rally was evenly distributed across both quarters of the first half of 2023. In the first quarter, the index climbed by 16.8%, followed by a 12.8% increase in the second quarter. With the exception of a minor loss in February, the index maintained a positive trajectory for the remaining five months of the first half of the year.
Will the Rally Continue in 2H?
The question at this stage is whether the momentum of the Nasdaq Composite will persist in the second half of 2023. Investors should note that the Nasdaq’s rally is closely tied to interest rate movements and the emergence and prevalence of newer technologies.
Growth stocks, particularly in the technology sector, underperforms in a rising rate environment. The Fed acted less-hawkish in the first-half of 2023, which aided the Nasdaq to a large extent. With the Fed indicating two rate hikes each worth 25 bps in the second-half, we may see some momentum loss in the second part of the year.
But then, AI and EV boom is here to stay. The tech rally in the first half was driven by AI, particularly generative AI. While some express concerns about an AI bubble, there are analysts like Dan Ives from Wedbush who compare the ongoing AI euphoria with the “fourth industrial revolution.”
"I think this is the fourth industrial revolution playing out. This is something I call a 1995 moment, parallel with the internet. I do not believe that this is a hype cycle," Ives said, as quoted on Business Insider. Hence, we can see the unfolding of the AI space is in the process and will continue to create significant business opportunities in the coming days.
Golden Cross Seen in Nasdaq
From a technical standpoint, the Nasdaq Composite currently stands at 13,791.65 at the time of writing, comfortably above its 50-day and 200-day moving averages of 12,884.62 and 12,332.01, respectively. The 50-day moving average is typically regarded as a short-term trendsetter, while the 200-day moving average is considered a long-term trend indicator.
The rise of the 50-day moving average above the 200-day moving average is known as a golden cross, which is a bullish sentiment over the long term.
Valuation: Currently 17% Discount to All-Time High
In terms of valuation, the Nasdaq Composite is not currently overvalued. In fact, the index is still 13.5% below its closing level in 2021. The index lost havoc in 2022 and thus is still not overvalued despite a 31.7% rally in 1H. The Nasdaq Composite reached its all-time high of 16,212.23 on November 22, 2021, which means a 17.6% rally is expected to regain that lost level.
ETFs in Focus
Against this backdrop, below we highlight a few Nasdaq ETFs so that interested investors can play the ongoing rally.
Image: Bigstock
Can Nasdaq ETFs Maintain Their Awesome 1H Rally in 2H?
After an awful 2022, Wall Street experienced a rebound in the first half of 2023. This recovery was aided by growth stocks, particularly in the technology sector. The tech-heavy Nasdaq Composite Index played a key role in reigniting the U.S. stock markets. In fact, the Nasdaq had its best first half in 2023, having gained about 31.7%.
Consistent Growth Throughout the First Half
The Nasdaq's rally was evenly distributed across both quarters of the first half of 2023. In the first quarter, the index climbed by 16.8%, followed by a 12.8% increase in the second quarter. With the exception of a minor loss in February, the index maintained a positive trajectory for the remaining five months of the first half of the year.
Will the Rally Continue in 2H?
The question at this stage is whether the momentum of the Nasdaq Composite will persist in the second half of 2023. Investors should note that the Nasdaq’s rally is closely tied to interest rate movements and the emergence and prevalence of newer technologies.
Growth stocks, particularly in the technology sector, underperforms in a rising rate environment. The Fed acted less-hawkish in the first-half of 2023, which aided the Nasdaq to a large extent. With the Fed indicating two rate hikes each worth 25 bps in the second-half, we may see some momentum loss in the second part of the year.
But then, AI and EV boom is here to stay. The tech rally in the first half was driven by AI, particularly generative AI. While some express concerns about an AI bubble, there are analysts like Dan Ives from Wedbush who compare the ongoing AI euphoria with the “fourth industrial revolution.”
"I think this is the fourth industrial revolution playing out. This is something I call a 1995 moment, parallel with the internet. I do not believe that this is a hype cycle," Ives said, as quoted on Business Insider. Hence, we can see the unfolding of the AI space is in the process and will continue to create significant business opportunities in the coming days.
Golden Cross Seen in Nasdaq
From a technical standpoint, the Nasdaq Composite currently stands at 13,791.65 at the time of writing, comfortably above its 50-day and 200-day moving averages of 12,884.62 and 12,332.01, respectively. The 50-day moving average is typically regarded as a short-term trendsetter, while the 200-day moving average is considered a long-term trend indicator.
The rise of the 50-day moving average above the 200-day moving average is known as a golden cross, which is a bullish sentiment over the long term.
Valuation: Currently 17% Discount to All-Time High
In terms of valuation, the Nasdaq Composite is not currently overvalued. In fact, the index is still 13.5% below its closing level in 2021. The index lost havoc in 2022 and thus is still not overvalued despite a 31.7% rally in 1H. The Nasdaq Composite reached its all-time high of 16,212.23 on November 22, 2021, which means a 17.6% rally is expected to regain that lost level.
ETFs in Focus
Against this backdrop, below we highlight a few Nasdaq ETFs so that interested investors can play the ongoing rally.
Invesco QQQ Trust (QQQ - Free Report)
Invesco NASDAQ 100 ETF (QQQM - Free Report)
Invesco NASDAQ Next Gen 100 ETF (QQQJ - Free Report)
Fidelity Nasdaq Composite Index ETF (ONEQ - Free Report)
Simplify Nasdaq 100 PLUS Convexity ETF (QQC)