Summer Could Be Trying, But Stocks Can Continue Climbing

The US equity market, particularly the Nasdaq-100 and tech-heavy ETFs like QQQ/QQQM, demonstrated unexpected strength through early August, with the S&P 500 and Nasdaq-100 returning 11.7% and 15.5% respectively, defying typical summer doldrums. UBS Wealth Management affirms the bull market remains intact, projecting further gains over the next year driven by a resilient US economy, robust consumer spending, AI growth, and the One Big Beautiful Bill Act. While anticipating potential near-term volatility, UBS views any market dips as strategic buying opportunities, especially for investors underweight risk assets, given QQQ/QQQM's significant exposure to preferred sectors like technology and communication services.

Analysis

The US equity market, particularly the Nasdaq-100, has demonstrated significant counter-seasonal strength, with the S&P 500 and Nasdaq-100 returning 11.7% and 15.5% respectively in the 90-day period ending August 4. According to analysis from UBS Wealth Management, the prevailing bull market remains intact, supported by several key catalysts. These include resilient domestic consumer spending, which directly benefits the consumer discretionary sector—the third-largest holding in Nasdaq-100 ETFs like QQQ and QQQM at nearly 13%. Furthermore, long-term growth opportunities in artificial intelligence are a material driver, given that technology stocks constitute 53.68% of these ETFs. The recent passage of the 'One Big Beautiful Bill Act' is also cited as a potential tailwind for corporate earnings. While UBS acknowledges potential near-term headwinds from trade uncertainty and elevated valuations, which could increase volatility, it frames any resulting market downturns as strategic buying opportunities. The firm's preference for the technology and communication services sectors, which combine for approximately 69% of the QQQ and QQQM portfolios, reinforces a bullish outlook on these specific investment vehicles.

Key Decisions for Investors

• Investors may consider maintaining or initiating long positions in Nasdaq-100 tracking ETFs like QQQ and QQQM, given the strong underlying fundamentals and expert opinion that the bull market remains intact.
• Anticipate potential near-term volatility and view any market pullbacks not as a sell signal, but as a strategic opportunity to increase equity allocations, particularly for portfolios that are currently underweight risk assets.
• Closely monitor the strength of US consumer spending and the realized impact of the One Big Beautiful Bill Act on corporate earnings, as these are identified as primary catalysts supporting further market gains through year-end.