The Invesco QQQ exchange-traded fund (ETF) soared in the first of the year, gaining 38.7% year to date through June 30, according to S&P Global Market Intelligence. As of July 14, the ETF was up about 42% YTD, trading at roughly $379 per share.
The ETF topped the S&P 500, which was up 15.9%, and the Nasdaq Composite, which gained 32% through the first half.
There is no great mystery why the Invesco QQQ performed so well in the first half of the year. As an ETF that tracks the Nasdaq 100 Index, it enjoyed the ride while technology stocks had a huge resurgence in the first two quarters of 2023.
The Nasdaq Composite posted a 32% return YTD through June 30, marking its best first half of the year since 1983, when it gained 37%. The Nasdaq 100, which the QQQ tracks, did even better, with its 38% YTD return through the first half of the year. It was the best first half ever for the Nasdaq 100.
Technology stocks rose for a few reasons. One, their prices and valuations had been so depressed over the previous year to 18 months that a massive bounceback was due. Plus, many of the larger technology stocks streamlined operations and cut costs during the downturn, so that helped spur growth.
Also, while interest rates are still high, the market embraced first the slowing of rate hikes, then the pause in rate hikes in June. With inflation dropping to 3% in June, the end of the Fed tightening cycle should be winding down, which is good news for technology firms.
Given the historic first half of the year for the Nasdaq, don’t expect to see the same type of gains in the second half of the year. However, economic conditions are improving for technology companies, and there should be continued growth. In years past, when the Nasdaq 100 has climbed over 20% in the first half of the year, it continued to rally in the second half, just not to the same extent.
Aside from the improving inflation and interest rate scenario, the technology market has been driven by the emergence of artificial intelligence (AI), and that trend is not going anywhere.
The QQQ is an excellent long-term ETF because it provides access to the biggest and best technology companies and can capture these emerging trends. Watch the valuation, particularly if it keeps surging, but over time, the QQQ has been one of the best long-term performers.
(Extract from an article published by The Motley Fool)