The technology sector and the Nasdaq 100 have suffered significant market turbulence this year, presenting an attractive opportunity for longer-term investors.
U.S. stocks fell on Monday as investors remain focused on developments in the Russian-Ukrainian war, as well as an expected interest rate hike later this week by the Federal Reserve.
On Monday afternoon, the tech-heavy Nasdaq fell more than 2% while the S&P 500 was down 0.74%.
The simple moving average is an indicator of the health of individual stocks and can be used to identify market trends and key prices. According to some investors, a healthy stock will consistently close above the 200-day moving average, according to YCharts.
However, in the current market environment, marked by turmoil, inflation and uncertainty regarding rising rates and geopolitical tensions, long-term investors have the opportunity to capitalize on traditionally expensive and highly valued funds. which are trading at a significant discount to their moving averages.
the Invesco QQQ Trust (QQQ) struck a death cross in mid-February, which is when the fund’s 50-day moving average falls below the 200-day moving average.
QQQ, as of the end of Monday, is trading at $318.17 – a significant discount from its 200-day moving average of $367.89 and its 50-day moving average of $357.82, according to data from ‘Ycharts.
Since 1971, the index has hit a killer cross 31 times, and in 77% of those cases the index was higher six months later, according to Potomac Fund Management, as quoted by Bloomberg.
While the likelihood of the Fed raising interest rates is a major concern for investors, contrary to popular belief, U.S. stocks have generally fared better during Fed tightening cycles than during easing cycles. from the Fed, According to Talley Léger, Senior Investment Strategist at Invesco.
Fed tightening happened in the second half of US economic cycles 67% of the time, and Fed easing overlapped US economic recessions 67% of the time, according to Leger.
Further downside and volatility are expected as Russia’s invasion of Ukraine came as a huge surprise to markets, as evidenced by the sell-off in equity markets as well as some speculative activity in commodity prices; however, analysts predict markets will begin to rally as the global economy adjusts to expectations and assimilates such a dramatic deviation from conventional expectations, according to Invesco.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.