Nasdaq Outperforms Major Indices in 1H20: ETFs to Gain

The first half of 2020 has been majorly dominated by the coronavirus pandemic. The tech-heavy Nasdaq Composite index, however, showed some resilience to the virus attack and has managed to gain around 10% so far. However, other major stock market indices like Dow Jones Industrial Average and the S&P 500 index have lost around 10.3% and 6.6%, respectively, in the same period.

Even since Mar 23, when the coronavirus worries had peaked, ravaging the stock market, the Nasdaq has recouped losses and gained more than 43% against Dow Jones Industrial Average index’s recovery of around 37% and the broader S&P 500 index’s 36% rise. Going by Dow Jones Market Data, for the second time since its foundation in 1971, Nasdaq has been able to outperform peers in the middle of the year (per a MarketWatch article). The same phenomenon was last observed in 1977.

It is being widely believed that the major technology companies’ resilience to the coronavirus crisis must have supported the tech-heavy index. Major technology stocks like Facebook FB, Microsoft MSFT, Apple AAPL, Netflix NFLX and Alphabet GOOGL are all positive in 2020 so far. Moreover, Amazon AMZN has supported the Nasdaq by gaining more than 45% in the year.


In this regard, Ed Yardeni, president and chief investment strategist at Yardeni Research, had once said that “while we have all become even more dependent on the products and services provided by the FAANGMs during the Great Virus Crisis, they might have become more immune to government regulation. They have great balance sheets and generate lots of cash flow,” according to a CNBC article.

Looking Forward

The second half of 2020 is expected to keep facing the brunt of the coronavirus pandemic as the second wave of the outbreak is gathering steam. In the current scenario, the rising work-from-home and online shopping trend, increasing digital payments, growing video streaming and soaring video game sales are slowly becoming the “new normal.” With the new trends making way, these major technology stocks are expected to continue to gain on rising demand for their products and services.

Going on, even as the U.S. economy is reopening in phases and social-distancing restrictions are being eased, people are trying to minimize human-to-human contact. It’s largely because the pandemic has resulted in some changes in the lifestyle and preferences of Americans. Most of the surveys have found that people are more interested in online shopping rather than visiting a brick-and-mortar store for their purchases of essential food items and supplies now. However, considering the surging number of coronavirus cases, some states have started to pause the reopening process in the United States. Notably, Texas Governor Greg Abbott has announced holding back of reopening plans.

ETFs to Gain

Investors seeking to ride the Nasdaq bulls could consider the following ETFs. These funds might see massive trading volumes in the days ahead if the afore-mentioned trends stay.

Invesco QQQ QQQ — up 14.2% year-to-date

This ETF provides exposure to 104 largest domestic and international non-financial companies listed on the Nasdaq by tracking the Nasdaq-100 Index. QQQ is one of the largest and most popular ETFs in the large-cap space, with AUM of $111.52 billion and average daily volume of around 52.3 million shares. It charges investors 20 bps in annual fees. The fund sports a Zacks ETF Rank #1 (Strong Buy), with a Medium-risk outlook (read: Top-Ranked ETFs That Crushed the Market in 1H).

Fidelity Nasdaq Composite Index Tracking Stock ONEQ — up 9.6%

This ETF tracks the Nasdaq Composite Index, holding a broad basket of 992 stocks. It has AUM of $2.64 billion. The expense ratio comes is 0.21%. The product carries a Zacks ETF Rank #2 (Buy), with a Medium-risk outlook (read: Make the Most of the Big Tech Rally With These ETFs).

First Trust NASDAQ-100 Equal Weighted Index Fund QQEW — up 6.2%

Holding 105 stocks, this fund replicates as closely as possible, before fees and expenses, the price and yield of the NASDAQ-100 Equal Weighted Index. It has amassed $822.8 million in its asset base, while it trades in lower volumes of nearly 115,000 shares a day on average. QQEW carries a Zacks ETF Rank #3 (Hold), with a Medium-risk outlook (read: Nasdaq is Burning Hot: How to Make the Most of it With ETFs).

ProShares Ultra QQQ QLD — up 16.7%

Investors seeking 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. The fund has AUM of $2.46 billion and charges 95 bps in fees and expenses.

ProShares UltraPro QQQ TQQQ — up 6.7%

For a more bullish approach, TQQQ could be an excellent choice. It also tracks the NASDAQ-100 Index but offers thrice the returns of the daily performance, with the same expense ratio of QLD. The fund has managed AUM of $5.80 billion (read: Best Leveraged/Inverse ETFs of June).

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Microsoft Corporation (MSFT) : Free Stock Analysis Report, Inc. (AMZN) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Netflix, Inc. (NFLX) : Free Stock Analysis Report
Invesco QQQ (QQQ): ETF Research Reports
Facebook, Inc. (FB) : Free Stock Analysis Report
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
First Trust NASDAQ100 Equal Weighted ETF (QQEW): ETF Research Reports
ProShares Ultra QQQ (QLD): ETF Research Reports
Fidelity NASDAQ Composite Index Tracking Stock Fund (ONEQ): ETF Research Reports
ProShares UltraPro QQQ (TQQQ): ETF Research Reports
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