ACTV - Economy Hasn't Gained Interest Rates Haven't Changed QQQ +40% Since October
2024-07-01 03:13:05 ET
Summary
- The Invesco QQQ Trust ETF has experienced a sharp +40% price jump since October, lacking material fundamental reasons for the advance.
- The Big Tech market rally seems to be based on hopes for future AI efficiency gains, not dramatic business growth or lower interest rates.
- I am warning of a potential market correction, possibly evolving into a major bear market, due to diverging breadth participation, contracting liquidity signals, and too much debt overhanging the economy.
What's been truly amazing (and a little scary for those of us investing using math) since October's stock market low is very little seems to be underpinning the +40% price jump in the Invesco QQQ Trust ETF ( QQQ ) and sister product Invesco NASDAQ 100 ETF ( QQQM ). The rally started out as a play on soon to be announced cuts in short-term interest rates by the Federal Reserve (which have yet to appear). It was based on the forecast inflation rates would slide back under 2% YoY in the first half of 2024 (which did not happen, cost-of-living increases remain a good 3% today vs. last year, with crude oil on the rise). Then, Wall Street focus turned to the revolutionary gains in worker productivity and business profitability bound to happen (eventually) from artificial intelligence leaps forward.
Sure, we can say minor progress on the foundation for the market has taken place. Long-term interest rates are fractionally lower than October, inflation has come down from 4%, and the semiconductor industry creating AI-related chips has experienced an uptick in sales/income. Perhaps you can argue the whole market is worth 5% to 10% more than eight months ago, maybe the Big Tech names are worth 10% to 15% more. However, the QQQ +40% spike seems just as much based on hopes and dreams for a better future, than underlying fundamentals....
Economy Hasn't Gained, Interest Rates Haven't Changed, QQQ +40% Since October