Should You Buy the Dip in Nasdaq ETFs?

Wall Street is off to a wobbly start in 2025 due to speculation that the Fed may limit the scope for further interest-rate cuts amid a strong economy and expectations for higher inflation. The Nasdaq-100 exchange-traded fund (ETF) Invesco QQQ Trust QQQ has lost about 1.7% so far this year (as of Jan. 14, 2025).Should You Buy the Dip in Nasdaq?BlackRock’s Rick Rieder would “100%” buy the Nasdaq dip, as quoted on CNBC. Investors should note that the Nasdaq plunged more than 30% in 2022 but overcame the downturn of the bear market to climb by 43% in 2023. Over the past one year, the Nasdaq added more than 23% (as of Jan. 13, 2025).Since 1990, the Nasdaq has returned an average of 215% during bull markets, with average durations of about 40 months. If the current bull market remains in line with the historical average, the Nasdaq will jump another 139% from its cyclical low during the next 22 months.Let’s find out a few factors that could support the potential rally of the Nasdaq.Inside Nasdaq’s Potential RallyAI EuphoriaThe Nasdaq’s latest success should be associated with huge enthusiasm over artificial intelligence (AI). The “Magnificent 7,” which includes Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA and Tesla, has led the Nasdaq’s recovery from a tumultuous 2022 that was marred by rising interest rates and recession fears.Notably, Microsoft has emerged as a leader in the AI landscape. The likes of Alphabet, Meta and Amazon have joined the spree. The chip maker NVIDIA is supposedly the key beneficiary of AI enthusiasm. Entering 2025, the AI euphoria is in fine fettle.Fed Rate Cuts Likely in 2025, If Not Very Frequent The Fed enacted its first rate cut in four years in September 2024. Then, two rate cuts were enacted in November and December.  We may see at least two rate cuts in 2025 unless there is a significant surge in inflation in the Trump 2.0 era. If the price inflation remains in moderation, the Fed should be in a dovish mode.Biotech Stocks to Rebound?The Nasdaq has solid exposure to the biotech space. Novel drug launches, likely lower rates from 2024 and easy access to funds should buoy the zone in the coming days. The group may be lifted by M&A activities.Resilient ConsumersThe Nasdaq -100 Index has invested 18.28% weight in consumer discretionary and 3.38% weight in consumer staples. Hence, a resilient consumer base is a plus for the index. Although the University of Michigan consumer sentiment for the United States fell to 73.2 in January 2025 from 74 in December, December’s reading was the highest in eight months.ETFs in FocusAgainst this backdrop, below, we highlight a few Nasdaq ETFs, such as QQQ, Invesco NASDAQ 100 ETF QQQM, First Trust NASDAQ-100 Equal Weighted Index Fund QQEW, Invesco NASDAQ Next Gen 100 ETF QQQJ and Direxion NASDAQ-100 Equal Weighted Index Shares QQQE.Want key ETF info delivered straight to your inbox?Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Invesco QQQ (QQQ): ETF Research Reports First Trust NASDAQ-100 Equal Weighted ETF (QQEW): ETF Research Reports Direxion NASDAQ-100 Equal Weighted Index Shares (QQQE): ETF Research Reports Invesco NASDAQ Next Gen 100 ETF (QQQJ): ETF Research Reports Invesco NASDAQ 100 ETF (QQQM): ETF Research ReportsTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks