Many view growth stocks, including tech stocks, as sensitive to rising interest rates. Last year confirmed this thesis. That script has been flipped for the better this year as technology ranks as one of the best-performing groups in the S&P 500 despite multiple rate hikes by the Federal Reserve.
Of course, that’s good news for exchange traded funds such as the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM). 10-year Treasury yields flirting with 4.36% and the possibility of another rate hike arriving in 2023 cause concerns. The primary concern is that tech stocks could be crimped.
The notion that assets such as QQQ and QQQM have already delivered impressive gains this year enhances that concern. That assumes tech/growth stocks lack for catalysts, which is not the case.
Familiar Catalyst Could Support Tech, Even if Rates Rise
A familiar catalyst could provide support for QQQ/QQQM holdings even if rates rise. That spark is artificial intelligence (AI). AI has already fueled significant 2023 upside for a slew of QQQ and QQQM member firms.
In a recent note to clients, Wedbush analyst Dan Ives surmised that tech stocks can rally into year-end. This is even with 10-year yields residing north of 4% with AI acting as the fuel for that upside.
“We believe tech stocks rip higher into year-end with the new tech bull market here despite the Street’s near-term focus on the Fed, which is starting to finally wave the white flag in our opinion with rate cuts on the horizon in 2024,” he wrote.