With the dust settling from the recent US election, many Australian investors are paying close attention to the BetaShares NASDAQ 100 ETF (ASX: NDQ).
This ASX-listed exchange-traded fund (ETF) tracks the performance of the NASDAQ-100 Index (NASDAQ: NDX) and offers exposure to some of the most significant tech stocks worldwide.
At the time of writing, NDQ shares in the ETF are trading 0.73% higher at $47.06, having soared this week after the conclusion of the US Presidential election.
With the election behind us and the results decided in former president Donald Trump's favour, here's the question: Is now the right time to buy? Let's take a look.
A snapshot of ASX NDQ's performance
The ASX NDQ ETF has outperformed the Australian benchmarks, delivering a 27.1% return over the past 12 months and an average annual return of 20.5% over five years.
Past performance doesn't guarantee future gains, but this ETF has certainly benefited from the strong performance of the US tech sector.
One way to assess the ASX NDQ is by looking at its price-to-earnings (P/E) ratio. As of September 30, the ETF's forward P/E ratio was 26 times.
While this may seem high compared to many ASX stocks, the companies within the NASDAQ-100 have historically delivered robust earnings growth.
This growth has been reflected in the stock prices of these companies, and in the price of the ETF itself.
Key holdings
The ASX NDQ ETF is heavily weighted towards leading tech players. Top holdings include Apple Inc, Microsoft Corporation, and NVIDIA Corp.
These companies are at the forefront of advancements in artificial intelligence (AI), cloud computing, and other technologies expected to drive future growth.
For investors, this means exposure to the higher-growth segments of the market. The trade-off is greater volatility.
But using recent data, US tech has outperformed all major asset classes except bitcoin in the past five years.
If this were to continue, the NDQ ETF would be Australia's direct access to this on the ASX.
So, is now the time to buy after the US election?
The decision to buy any security should never be predicated on the outcome of a single event, not for long-term investors anyway. The same is true for the ASX NDQ ETF.
In saying that, there's merit in gauging the directional bias of the market, especially when evaluating international shares.
The NASDAQ 100 Index has soared to new heights this week after the election was done and dusted.
This may or may not have what to do with Trump's policies concerning import tariffs and tax cuts.
Bahnsen Group's chief investment officer (CIO), David Bahnsen, said sentiment had picked up now the results were in.
In a note to clients this week, the CIO also said investors are "pro-growth, pro-deregulation, and pro-markets". This is a positive for US shares in the NASDAQ Index. According to NBC News:
There is also an assumption that (merger and acquisition) activity will pickup and that more tax cuts are coming or the existing ones will be extended. This creates a strong backdrop for stocks.
Goldman Sachs analysts added to this, noting that the market was betting on the tax cuts and the deregulation policies, meaning "certain laggards start to derive equity returns" based on this.
The company's Christian Mueller-Glissman said we would likely see valuations expand and "get a broadening out of equity returns".
[I]n this late cycle backdrop, we want to protect equity overweights as much as possible, until you actually have a real reason to worry, which is mainly a recession.
Mueller-Glissman means to remain overweight on US equities in this instance, and is bullish on the US market.
Meanwhile, the US Federal Reserve also cut interest rates by 25 basis points overnight, potentially providing another tailwind for US stocks in the ASX NDQ ETF.
It's important to read between the lines here. A pullback in interest rates could spur growth and also be a sign that inflation is tempering.
Given that markets are forward-looking, investors may already be pricing these factors in. Time will tell where we go from here.
ASX NDQ ETF takeaway
The ASX NDQ ETF offers investors a diversified way to tap into the high-growth US tech sector. With the US election done and dusted, markets seem to be looking to the future, as they typically do.
US stocks have rallied hard this week and may continue to do so as long as sentiment remains positive, experts say.
The NDQ ETF is up more than 25% this year to date.
