This year’s best ETFs contest has been a wild one so far. The coronavirus from China was a black swan event that no one could have seen coming, and most stocks have been hammered as a result. Looking at all the exchange-traded funds in the contest, it’s hard to see any industry that’s widely successful right now. And our reader’s choice for the contest, the Invesco QQQ Trust (NASDAQ:QQQ) fund, certainly hasn’t eluded damage.
In fact, the QQQ’s design as a predominantly tech-based fund is probably part of why it’s suffering.
The tech world encompasses a huge chunk of the S&P 500, and whenever we face worldwide turmoil that also impacts the U.S., these stocks are some of the first to feel the pain. Whether the suffering is justified is another story entirely, but the fact remains: Hot stocks will oftentimes attract their fair share of overreactions, no matter how strong a company may be.
But even though the QQQ ETF is deep in the red — down 16% year to date — it isn’t as bad off as many other ETFs in the contest.
For example, the U.S. Global Jets ETF (NYSEARCA:JETS) is down a whopping 55%. That shouldn’t be a shocker, since the last thing on anyone’s mind right now is getting on an airplane and traveling the world amid a global pandemic.
Well, maybe not everyone is as concerned as they should be.
What to Expect From the QQQ ETF Now
But with all of this madness in the mix, what can we realistically expect from the QQQ in 2020?
Obviously the first quarter is a bust, and it’s likely that coronavirus concerns (and the subsequent impact) will continue to permeate throughout the world for the next few months as well. And that’s the bare minimum expectation in my mind. Assuming efforts like social distancing stave off the spread of the virus, then the U.S. might start its journey back to “normal” sometime in the summer.
Logically speaking then, we might assume that the QQQ ETF should also start to inch its way back into the green as the threat of the virus starts to dissipate. That is, of course, assuming that no other initiatives put a dent in this progress. After all, the ETF encompasses the 100 largest companies by market cap that are listed on the Nasdaq. If things start to improve, then we should expect some of these businesses to make a quick comeback.
But, no matter what happens, the road back upward will undoubtedly be lengthy and challenging for most companies. And this is where I’m going to have to be blunt: We really have no idea what to expect right now.
If we look at history, we can only expect that things will ultimately get better with time. But things have been so wild in the markets lately that any changes in the trajectory of the virus’ course — positive or negative — could have a drastic effect.
Things will likely get back to some sort of normal eventually. The real question is how long will it take? I can’t pretend to know the answer.
Can We Really Determine the Best ETFs Right Now?
Right now, I can’t flat out say that our readers are right and the QQQ ETF will be one of the best ETFs to buy this year. However, what I can say is that relative to many other ETFs in the contest, QQQ has been one of the best performing. That demonstrates its staying power relative to other options.
The QQQ’s inclusion of communications services stocks like Facebook (NASDAQ:FB), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Netflix (NASDAQ:NFLX) help ensure its viability amid growing social distancing initiatives. And holdings like Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN) also help promote its strength, both during the outbreak and in its aftermath. Even more people have started to gravitate towards using the services these companies provide, and that likely won’t stop once virus concerns diminish. Plus, it boasts an affordable expense ratio of 0.2%, or $20 per $10,000 invested annually.
So, while it might be too soon to say that QQQ is the best ETF to buy this year, it clearly still has a chance to power through this pandemic and make a solid comeback at the end of the year. That is, of course, if the world starts to recover.
Robert Waldo has been a web editor for InvestorPlace.com since 2016. As of this writing, he did not hold a position in any of the aforementioned securities.