For growth-focused investors looking to add to a position after the latest V-shaped recovery from that start-of-the-year correction (or near correction for the S&P 500), there are plenty of options out there to consider before the price of admission on stocks looks to rise to highs not seen since before the war in Iran began.
Undoubtedly, the conflict in the Middle East isn’t over, but the market seems to think that an end is in sight. Combined with the pullback in oil prices (could West Texas Intermediate (WTI) be headed below US$80 per barrel sooner than most thought?), it certainly seems like the coast is clear for the market rally to pick up where it left off.
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Growth stocks are coming back. Time to buy back?
Growth stocks, especially those with high multiples, have been punished most severely. And if you’re in the software scene, you’ve probably felt “triple damage,” so to speak, given the added layer of uncertainty surrounding the next era of AI agents and the disruptive threat they pose to the Software-as-a-Service business model as we know it.
While some might be holding off on the latest V-shaped bounce, while others look to take some profits off the table, I’d argue that it makes sense to buy if you’re committed to the long term, even if it means the pace of gains from here will taper off going into the year’s end. At the end of the day, the AI revolution seems to be far more than just a bubble. With Anthropic’s Claude Mythos finding a ton of vulnerabilities in various pieces of software, it certainly feels like the tangible benefits have the potential to be considerable.
Of course, it’s hard to know where AI and agents go from here, but given the impact it’s had on tech, I’d argue that it might not take long before high AI capital expenditures (CapEx) are rewarded rather than punished. When it comes to betting on AI, big tech, and the return of the growth trade, I think the Nasdaq 100 remains the quick and easy index to pick up.
What’s a great growth ETF to pick up?
For Canadians, there are a number of ways to bet on the index, which, in my view, is a great “spicy” growth-focused supplement to the S&P 500. Of course, there’s a lot of overlap between the Nasdaq 100 and S&P 500, especially at the top.
That said, if you want more top-heaviness and a better “seat” in the AI revolution and recovering growth and tech trade, I’d argue it makes sense to consider the index, especially if you’re a younger investor who can handle the added volatility.
If we’re talking about an RRSP, I like the Invesco QQQ Trust (NASDAQ: QQQ). It’s quick, easy, and will allow Canadian investors to minimize their expense ratio (it’s just 0.18%). Of course, the U.S.-traded ETF is in U.S. dollars, so prepare for the conversion.
By utilizing Norbert’s Gambit, investors can convert Canadian dollars to U.S. dollars quite efficiently without having to get dinged by one’s bank or broker. The strategy is well worth reading up on, given the big money it could save Canadian investors over the years, especially for larger portfolios with sizeable U.S. positions.
As for the RRSP, Canadians won’t get slapped with a 15% U.S. dividend withholding tax, which makes the QQQ really shine. For a TFSA or non-registered account, the TSX-traded version of the QQQ might be the more convenient bet if you want to hold more Canadian dollars and don’t mind the withholding tax (the QQQ isn’t exactly known for its dividend yield, anyway. Either way, the Invesco Nasdaq 100 Index ETF CAD (TSX: QQC) is also a standout offering if you want simplicity.
