Where will 2022 take tech-focused domestic equities?The bull case assumes that tech-focused equities will continue to rally through 2022 as pandemic-related disruptions persist. Technology companies, in particular, benefited as the global digital transformation accelerated. Consumer goods and services companies with technologically advanced operations were able to weather supply chain shocks and create new ways to market, manufacture, and deliver their products during a worldwide shutdown. The NDX, which has large portfolio weightings in technology, consumer goods, and consumer services, exhibited many of these strengths through its high annual returns. The NDX gained nearly 28% in 2021 on top of an already impressive 49% annual return in 2020.From a more bearish perspective, many investors are shifting to a cautious view as the Fed anticipates rate hikes in 2022. Large-cap technology stocks in particular could be hit harder given their higher prices and elevated valuations. An increase in interest rates would increase the cost of borrowing and reduce corporate earnings. If corporate earnings can’t support elevated valuation levels, then equity prices could see a correction.Why QSWNXT?
QSWNXT provides exposure to the NDX with a 10% weighting to into in-the-money call options on QQQ (the Invesco QQQ ETF, which tracks the NDX). The remaining 90% of the index consists of U.S. Treasury securities as a buffer against significant losses. While this means that QSWNXT may only participate in some of NDX’s upside, QSWNXT is also protected from large swings to the downside, which are created by Black Swan events and other market disruptions.
Investors who fear a market correction or more uncertainty from new COVID-19 strains, inflation, and Fed actions may be looking for less risky ways to participate in domestic tech equities. QSWNXT provides a strategy for investors who believe technology and innovation will remain a crucial driver behind the U.S. economy but want to minimize volatility in an uncertain environment.Learn more about the S-Network BlackSwan Indexes here.
The S-Network BlackSwan Tech & Treasury Index (QSWNXT) is the underlying index for the Amplify BlackSwan Tech & Treasury ETF (QSWN).