The gains may be slowing, but so far the 2018 trajectory for the PowerShares QQQ Trust ETF (NASDAQ:QQQ) has remained firmly upward. And that trajectory has carried the readers’ choice fund toward the top in this year’s Best ETFs contest.
And right now, perhaps the biggest question is: will it continue to rise, or will it falter in the face of the trade war?
Certainly, the expanding bevy of tariffs has got the sector on edge, and its heavy lean toward the tech sector doesn’t help. Four tech companies have appealed to the Donald Trump administration for exemptions. One of the biggest members of the QQQ ETF’s portfolio — Apple (NASDAQ:AAPL) — actually got some products exempted. The potential for the impact to grow going forward can’t be ignored.
Still, the QQQ ETF is kind of lucky on the tariff front. After Apple, its second-biggest constituent is Amazon (NASDAQ:AMZN), and Amazon doesn’t have nearly the same danger from tariffs that Apple does. Less of Amazon’s business is reliant on the sort of things these tariffs are targeting. Instead, it focuses more on services. As already mentioned, Apple got some exemptions. And between the two of them, those companies make up nearly a quarter of the QQQ ETF.
And all the other companies that constitute more than 4% of the fund look like Amazon — there’s certainly some exposure to the threat, but it could be a lot worse. Once you get further down the list of holdings, you start to see more diversity in the type of company.
All in all, while the trade war will definitely impact the QQQ ETF going forward, I don’t think it’s going to be crippling. And that should mean it stays in the running for the Best ETFs contest crown.
Positives for the QQQ ETF
Looking to sunnier news, there is one other thing in the fourth quarter that should have both Apple and Amazon smiling — the lucrative holiday season. Plenty of people will be picking up the latest iPhone or Apple watch to put under the tree for a loved one. Many, many others will be ordering their presents from the comfort of their home at Amazon.com. It’s hard to bet against either of them during the season of “giving.” Plus, looking down through the names in this fund, it’s chock full of big, safe companies. Whether the broader market keeps going up or starts to correct, they should be able to weather the storm.
The QQQ ETF is currently dueling with Todd Shriber’s pick, ALPS Medical Breakthroughs ETF (NYSEARCA:SBIO), for first place in the contest. Can our readers’ pick take the top prize?
Honestly, I think it has a good shot.
Jessica Loder is an assistant editor at InvestorPlace.com. As of this writing, she did not hold a position in any of the aforementioned securities.