The tech sector accounts for 30% of the S&P 500’s weight. That’s more than the second- and third-largest sectors combined. So, many professional investors have no choice but to meet or exceed that weight to try to beat the benchmark domestic equity gauge.
Some appear to be doing that. And in what could be a plus for ETFs such as the Invesco QQQ Trust (QQQ ) and the Invesco NASDAQ 100 ETF (QQQM ), data indicates pros are bullish on technology stocks. The February edition of Bank of America’s Global Fund Manager Survey indicates fund managers are sporting their highest allocations to domestic equities since late 2021 and are bullish on tech.
That could be good news for QQQ and QQQM. Those ETFs allocate more than half their weights to technology stocks.
Other Important Clues in BofA Survey
Another item of interest in the survey is that two-thirds of those queried believe the U.S. economy – the world’s largest – will avoid a recession. That’s a higher percentage than what was seen in any of the bank’s surveys over the past two years.
That optimism is also relevant to advisors and investors mulling stakes in QQQ and QQQM. That’s because tech stocks are considered cyclical. That means a traditional recession could dampen the outlook for the sector. Additionally, the Invesco ETFs devote 13.52% of their weights to the consumer discretionary sector. That group would almost assuredly be vulnerable to economic contraction.
Regarding the ETFs’ consumer cyclical exposure, some market observers believe even in the face of pesky inflation, the U.S. consumer remains vibrant. That could further support multiple tailwinds this year.
The survey also indicated the level of cash being held by portfolio managers is down to 4.2% from 4.8%. That indicates those investors are putting capital to work. And that could be a sign those market participants expect the Federal Reserve to lower interest rates this year. Because as bond yields decline, so do cash yields. That makes money markets and the like less appealing.
“In any case, most of BofA’s survey respondents anticipate inflation to continue declining. The odds of a hard landing and recession eased to 11%, while the biggest risks ahead include the US election, geopolitical uncertainty, and negative credit events most likely stemming from the commercial real estate sector,” reported Business Insider.
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