The Nasdaq 100 is leading the charge in the market, driven by exciting advancements in AI, robotics, autonomous vehicles, and the metaverse. Companies in the Nasdaq 100 are well-positioned to benefit from these transformative technologies.
Invesco’s Trust ETF (QQQ) serves as a proxy for the Nasdaq 100 and includes top holdings like Microsoft, Apple, Nvidia, Amazon, Tesla, Alphabet, and other tech giants. These companies make up over 50% of QQQ’s weight.
Since the bear market lows, our favorite tech stocks have experienced significant appreciation. Companies like Microsoft, Apple, Alphabet, Nvidia, AMD, Meta Platforms, Amazon, and Palantir have seen impressive gains ranging from 44% to 289%. While short-term pullbacks are possible, high-quality tech companies are expected to continue dominating as they achieve higher revenue growth and increased profitability.
Additionally, the Federal Reserve is nearing the end of its tightening cycle and is expected to adopt a more accommodative monetary stance. This shift in policy should benefit top tech companies further.
However, the upcoming payrolls report poses a wildcard. If the jobs report disappoints, it could lead to a significant market pullback. It’s essential to monitor this report closely.
The Nasdaq 100 has soared since the bear market ended in October of the previous year. QQQ is now 40% above its low point and has surged by 35% since the beginning of this year. While the technical indicators suggest an overbought condition in the near term, a 5-10% correction could create buying opportunities around the $330-315 range.
The jobs number will be crucial in influencing market movements. If the reading is in line with expectations or better, it should be positive for stocks. However, a number below 100-150K could signal worsening economic conditions and negatively impact the market.
There are probabilities of another 25 Bps benchmark rate increase due to the unexpected rise in PCE inflation. However, the market has previously responded well to incremental rate hikes. If the Fed raises rates at the next FOMC meeting but maintains a relatively dovish stance, it may cause the QQQ to drop to the $330-315 range. Nonetheless, the rate cycle is nearing its end, and the Fed is expected to pivot towards a more accommodative monetary policy.
In conclusion, despite the possibility of a near-term pullback, it is advisable to hold onto excellent technology companies for the long term. With a significant technology allocation in the All-Weather Portfolio and hedging strategies in place, any significant correction should be seen as a buying opportunity. The year-end price target range for QQQ is projected to be $380-420, indicating potential growth of 10-20% from current levels.
