During the financial crisis, the Invesco QQQ Trust (NASDAQ:QQQ) offered an opportunity to investors willing to stay calm and keep focused. From its low in March 2009, the QQQ ETF would rally 565% over the next decade.
The current crisis offers another such opportunity for investors. I’m not dismissing the tragic toll the coronavirus has taken. But as I’ve said for weeks now, we will get through this difficult period. And once we do, I still believe the U.S. and world economies will return to growth.
In fact, I’ve called the coming decade the “Roaring 2020s.” Admittedly, the decade is off to a terrible start.
But in early 2009, many believed the worst was still yet to come, and that the next decade would be dismal. Few would have argued — at least publicly — that the longest macroeconomic expansion in U.S. history was on the way. But that’s exactly what happened.
I’m not making that exact prediction right now. But, again, we will get through this time. And the innovations that were driving investor excitement just two months ago still are on the way. The technologies that are going to transform and improve this world will come.
This, too, shall pass. And investors looking for a diversified bet on a brighter future are being given an opportunity in the QQQ ETF. QQQ tracks the NASDAQ 100 Index — which contains some of the biggest and best tech stocks in the world. Those are precisely the kind of companies investors should be looking to own right now.
Growth Is Delayed, Not Lost
Again, I don’t mean to dismiss the toll these few weeks will take. But investors — indeed, all of us — should take solace in the fact that innovation is going to continue. What I like to call ‘megatrends’ still exist. Their arrival simply has been pushed back a few months.
5G (fifth-generation) wireless is on the way. That will have transformative impacts, some of which haven’t even been developed yet.
Electric and autonomous vehicles will increase productivity and save lives. Their growth not only can provide a catalyst for auto manufacturers, but their worldwide supply chains.
Artificial intelligence continues to evolve. There, too, the benefits won’t just accrue to the leaders. Demand for semiconductors will skyrocket. Productivity will improve — and that usually leads to higher wages.
In the meantime, once this shutdown is over, we will see huge amounts of pent-up demand that could stoke a quick economic rebound. I know I’m not the only one with cabin fever right now. I’m surely not the only one who plans to do something about it as soon as possible.
2009 and 2019
From an investment standpoint, the last few weeks have been difficult and scary. As I write this, the QQQ ETF is down 26% from its highs. Many other stocks have done far worse.
But again, keep 2009 in mind. It seemed like the financial world was ending. It was an opportunity.
Keep the next ten years in mind as well. Even with the declines of late, consider the multi-year performance of the QQQ:
- 1-year: -2.1%
- 3-year: 32.5%
- 5-year: 63.3%
- 10-year: 266.1%
Even with this recent bout of volatility, the ETF has held up over the past twelve months. Going back to 2015, it’s returned in the range of 10% annualized, or better. Performance immediately after the financial crisis was even better.
Those kinds of returns are impressive over such a long stretch. And they’re not available elsewhere. The 10-year Treasury, for instance, now yields barely 1%. It’s possible, if not likely, that yield won’t even cover inflation.
In any market, it’s important to keep calm and take the long view. In this market, it’s absolutely critical. U.S. stocks, and particularly the QQQ, have been tremendous investments over the past decade. I believe they will be in the coming decade as well.
The Case for the QQQ ETF
This sell-off has created opportunities across the market. Luckin Coffee (NASDAQ:LK) is an excellent play on growth in the Chinese economy, which is already recovering. Lululemon Athletica (NASDAQ:LULU), one of the world’s best apparel companies, is on sale.
But the QQQ ETF is attractive as well, particularly for investors who don’t want to take on single-stock risk. As it mimics the NASDAQ 100, it’s generally tech-focused, but not exclusively so. Almost 6% of the portfolio consists of Pepsi (NASDAQ:PEP), Costco Wholesale (NASDAQ:COST), Starbucks (NASDAQ:SBUX) and snack manufacturer Mondelez (NASDAQ:MDLZ).
Still, this is largely a tech play and heavily a ‘Big Tech’ play. The three largest holdings, unsurprisingly, are Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), and Amazon (NASDAQ:AMZN). They comprise nearly one-third of the fund’s assets.
There’s broad exposure too, with chip stocks and software plays well-represented.
The QQQ provides diversified exposure to tech and thus to the megatrends that are going to define the industry this decade. That’s exposure investors should be looking for right now.
Many — in fact, most — of the QQQ’s individual components have their own bull cases. As a whole, however, QQQ can be the cornerstone of a portfolio that is focused on growth looking forward and reasonable valuations right now.
Timing is important, and in this volatile market short-term caution is recommended. For long-term investors looking to re-enter this market, however, the QQQ is an excellent place to start.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.