Following a volatile year for the U.S. stock market, the Federal Reserve raised interest rates by 75 basis points in September. This hardline approach sent stocks tumbling further, in a year-so-far that's seen the NASDAQ 100 slide by 33%. With the Invesco QQQ ETF tracking the NASDAQ, could now be the time to sell?
Have We Reached the Bear Market Bottom?
The tech sector accounts for almost 50% of the NASDAQ 100, and this year's plummeting stock prices have investors speculating about whether an end is in sight. There's a good chance that previous recessions hold the answers.
Back in 2000, when financiers overvalued dot-com startups, the NASDAQ became supremely bloated. In 2008, the credit risk spread was out of control, leading to the housing bubble and ultimately the Lehman Brothers downfall. Today, the NASDAQ 100 is reasonably priced, and the credit risk is low to moderate. As such, the chances of a deep recession, credit crunch, or bubble burst are slim.
There are mixed signs that a bottom is forming. Market breadth is improving and the world's geopolitical status is fraught, so stocks might even be braced for a bear rally.
Is it Time To Sell QQQ Shares?
At the beginning of the year, there was no denying that shares were overvalued. If you didn't sell up then, you may have missed the boat—providing the global economy remains stable. If the Fed does pivot, a rally in stocks is almost guaranteed.
As things stand, the QQQ is more neutral than bearish. Selling now would only be a smart move if the economy is set to take a further downturn.