The Betashares Nasdaq 100 ETF (NDQ) just hit a new 52-week high. Here's why

Investors are flooding back to US-based big tech companies.

| More on:
Two hikers high five each other having climbed to the top pinnacle of the mountain.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • It has been an excellent first half of 2023 so far for big tech on the NASDAQ
  • Apple, Microsoft, Alphabet and Amazon.com are all up more than 30% year to date
  • With inflation steadily drifting lower in the US, this bodes well for the NDQ ETF

The exchange-traded fund (ETF) Betashares Nasdaq 100 ETF (ASX: NDQ) continues to make a recovery and has just hit another 52-week high — its second peak in two days. What's going on with the US-focused investment?

For readers unfamiliar with this ETF, it's invested in 100 of the biggest businesses on the NASDAQ stock exchange in North America.

The Betashares Nasdaq 100 ETF is ideal for investors wanting exposure to top US tech names like Apple, Microsoft, Alphabet, Amazon.com, Tesla, Nvidia and Meta Platforms.

What's going on with the NDQ ETF?

Created with Highcharts 11.4.3BetaShares Nasdaq 100 ETF PriceZoom1M3M6MYTD1Y5Y10YALL31 Dec 202231 May 2023Zoom ▾9 Jan23 Jan6 Feb20 Feb6 Mar20 Mar3 Apr17 Apr1 May15 May29 MayJan '23Jan '23Feb '23Feb '23Mar '23Mar '23Apr '23Apr '23May '23May '23www.fool.com.au

As we can see on the unit price above, the Betashares Nasdaq 100 ETF has climbed more than 27% from the start of the year to today. That's significantly stronger than the S&P/ASX 200 Index (ASX: XJO), which has only risen by 3.6%.

Shares in the ETF topped yesterday's milestone of $31.38 with a fresh 52-week high of $31.70 at the time of writing.

Last year, its shares dropped by around 30%, so the ETF still has some way to go to recover from its record heights in December 2021 when it was trading above the $36 mark.

However, it appears that investors are becoming more confident in the collective outlooks of the ETF's holdings.

Remember, the returns of an ETF are dictated by its underlying holdings. If the (biggest) positions in the portfolio do well, then this can help the ETF deliver returns for investors.

Since the start of 2023, we've seen Apple and Microsoft shares climb 37.6% and 30%, respectively. Meanwhile, the Alphabet share price has risen 34% year to date, with shares in Amazon.com soaring 32%.

With these names having the biggest weighting in the portfolio, it would explain why the NDQ ETF has done so well.

What factors might be helping the recovery?

It's understandable why share prices fell last year as interest rates shot higher. Warren Buffett once said about interest rates:

The value of every business, the value of a farm, the value of an apartment house, the value of any economic asset, is 100% sensitive to interest rates because all you are doing in investing is transferring some money to somebody now in exchange for what you expect the stream of money to be, to come in over a period of time, and the higher interest rates are the less that present value is going to be.

So every business by its nature … its intrinsic valuation is 100% sensitive to interest rates.

Central banks sent interest rates higher to lower inflation. It seems to be working, though perhaps not as quickly as hoped.

The April 2023 US consumer price index (CPI) inflation showed 4.9% year-over-year growth, the lowest increase in two years. But, it's still more than the US Federal Reserve would like it to be, so I wouldn't expect any interest rate cuts in the next few months. US retail sales only grew by 0.4% in April, which was less than expected, according to CNBC.

Even so, lower inflation is positive if it means that interest rates don't need to go as high to bring inflation under control. However, there may be a danger that an inflationary mindset is embedded into US society, which wouldn't be ideal for bringing down inflation.

While the NDQ ETF may have been hurt by interest rates, many of the underlying businesses continue to see a good operating performance, which is helping support and grow their valuations. Time will tell if this rally can continue or if the Betashares Nasdaq 100 ETF has gone as far as it can in the shorter term.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon.com, Apple, BetaShares Nasdaq 100 ETF, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool Australia has positions in and has recommended BetaShares Nasdaq 100 ETF. The Motley Fool Australia has recommended Alphabet, Amazon.com, Apple, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on ETFs

Man holding a calculator with Australian dollar notes, symbolising dividends.
ETFs

$10,000 invested in CRYP ETF a year ago is now worth…

This exchange-traded fund allows investors to gain exposure to cryptocurrency in a different way.

Read more »

The letters ETF with a man pointing at it.
ETFs

Where to invest $5,000 in ASX ETFs in June

These funds could be worth a look if you have money to invest this month.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
ETFs

3 things about the Vanguard Australian Shares Index ETF (VAS) every smart investor knows  

This fund has a number of interesting characteristics. Here’s what I’m focused on.

Read more »

ETF on different coloured wooden blocks.
ETFs

BetaShares reaches $50 billion FUM: What are their 5 most popular ASX ETFs?

Do any of these 5 ASX ETFs appeal to you?

Read more »

ETF written on cubes sitting on piles of coins.
ETFs

2 amazing ASX ETFs I wish I'd bought a decade ago

These funds are impressive with their holdings and returns.

Read more »

tick, approval, business person with device and tick of approval in background
ETFs

Why this could become my favourite ASX ETF to buy

This ASX ETF ticks all my boxes.

Read more »

Three happy office workers cheer as they read about good financial news on a laptop.
ETFs

The best ASX ETFs to ride the AI and tech megatrends

Let's see what these exciting funds are invested in.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
ETFs

BetaShares ETF provider to expand into private credit. Should you be interested?

Private credit could be coming to the ASX.

Read more »