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Chicago, IL – January 13, 2023 – Zacks.com announces the list of stocks and ETFs featured on the Analyst Blog. Every day, Zacks Equity Research analysts discuss the latest news and events affecting stocks and financial markets. ETFs recently featured on the blog include: SPDR S&P Semiconductor ETF XSD, First Trust NASDAQ Technology Dividend Index Fund TDIV, Invesco S&P SmallCap Information Technology ETF PSCT, Defiance Quantum ETF QTUM, and First Trust Indxx Metaverse ETF ARVR.

Here are the highlights from Thursday’s analyst blog:

3 Reasons Tech ETFs May Rally in 2023

US tech stocks suffered a rough patch last year as rising inflation weighed on their elevated valuations caused by massive policy easing during the peak of the COVID-19 outbreak. Although technology stocks tried to recoup losses several times, investors remained wary of betting heavily on growth stocks.

Concerns about rising rates have tarnished the appeal of stocks that rely on easy borrowing for superior growth. Therefore, stocks of high-growth technology companies continue to be in a tight spot. As a result, the largest technology ETF SPDR Select Technology Sector Fund it has lost about 30% over the last year (as of January 9, 2022).

Now, the question is whether the sector can make a comeback in 2023. Daniel Ives, the well-known Wedbush tech bull, sees reason for hope in the tech sector in 2023, as cited on TipRanks. “In this carnage, we see growth opportunities as we believe overall the tech sector will be up about 20% in 2023 from current levels with Big Tech, software and semis leading the charge despite macro wildcards. /Fed,” according to Ives.

Slower rate increases in the coming days

With the release of some downbeat economic indicators to kick off the New Year, the Fed could slow rate hike momentum in the coming days. Fed officials raised interest rates by a half point in December, extending their aggressive tightening campaign and raising their benchmark rate target to a target range of 4.25% to 4.5%.

the story continues

Policymakers also forecast its short-term key rate to hit a range of 5% to 5.25% by the end of 2023, before easing to 4.1% in 2024. That suggests the Fed is prepared to increase its benchmark rate by an additional three-quarters of a point and then stay until the end of 2023. And we can expect a turnaround in 2024. This may go in favor of tech stocks and ETFs after a difficult 2022.

Layoffs to increase profitability?

Layoffs in Silicon Valley have been intense. Amazon, Meta, Twitter, Salesforce: Most of the tech giants have been on a layoff spree. Video-sharing outlet Vimeo said it was cutting 11% of its workforce. Digital fashion platform Stitch Fix said it planned to cut 20% of its salaried staff, after cutting 15% of its salaried staff last year. Such layoffs and cost cutting can boost the profitability of tech companies.

Technology is new normal

The “new normal” trends such as working and learning from home and online shopping, the rise of digital payments, and the growing video streaming scene are sure to stick around for a long time. The growing adoption of cloud computing and the continued infusion of AI, machine learning and IoT are the other winning areas. The expansion of data centers will continue to drive the business of the cloud. Also, the tech sector should have a strong focus on AI techniques and the home automation space.

Against this background, below we highlight some tech ETFs that have been booming this year (as of Jan 9, 2023) and have a P/E below the FactSet segment average of 28.28X.

ETFs in focus

SPDR S&P Semiconductor ETF – P/L: 22.78X; Year-to-date performance: 3.37%

First Trust NASDAQ Technology Dividend Index Fund – P/L: 21.39X; YTD Yield: 3.31%

Invesco S&P SmallCap Information Technology ETF – P/L: 22.70X; YTD Yield: 3.23%

Challenge Quantum ETF – P/E: 24.27X; Year-to-date performance: 3.11%

First Trust Indxx Metaverse ETF – P/L: 10.68X; Year-to-date performance: 2.9%

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Invesco S&P SmallCap Information Technology ETF (PSCT): ETF Research Reports

First Trust NASDAQ Technology Dividend ETF (TDIV): ETF Research Reports

SPDR S&P Semiconductor ETF (XSD): ETF Research Reports

First Trust Indxx Metaverse ETF (ARVR): ETF Research Reports

Defiance Quantum ETF (QTUM): ETF Research Reports

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