Business

Is it time to add a tech exhibit?


The NASDAQ composite index is well into bearish territory, down almost 30% since its peak last Friday.

“This makes sense given that tech stocks have higher valuations and are typically under pressure when rates start to rise. Additionally, tech stocks are typically ‘long life’ assets, meaning they have stronger earnings growth and therefore higher earnings expected later in the future,” Kristina Hooper, chief global market strategist at Invesco, wrote in an overview.

While the current selloff started in the more speculative corners of tech, it has spread to big companies with strong balance sheets.

“I think the current revaluation has been overdone, especially since I don’t think the Federal Reserve will tighten as much as the markets are currently expecting,” Hooper said.

In a higher inflation environment, Hooper finds the technology sector has generally been attractive because it typically has wider profit margins and can therefore tolerate higher input costs. And the tech sector, while still expensive, has valuations far below what they were during the tech bubble, according to Hooper.

This challenging environment, however, may be an opportune time for investors with longer time horizons to consider selectively increasing their exposure to technology. the Invesco QQQ Trust (QQQ), which holds the most valuable stocks traded on the Nasdaq, is by far the most popular ETF that tracks the NASDAQ-100 index and offers exposure to the biggest names in tech.

Hooper said the caveat is that there could be more volatility – and selling – coming soon; however, any weakness should provide entry points for the average buy into the tech sector for long-term investors.

For more news, insights and strategy visit the ETF Education Channel.

Learn more at ETFtrends.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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Eleon

"Writer. Coffee practitioner. Twitter specialist. Food trailblazer. Subtly charming analyst. Troublemaker. Unable to type with boxing gloves on."
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