Past performance is never a guarantee of future returns, but when it comes to the Nasdaq 100, the index tracked by the PowerShares QQQ (NASDAQ:QQQ), how the index performs early in the year usually dictates how the index finishes the year.
Believers in the January Indicator know that how stocks perform in the first month of the year often sets the tone for an entire year, but when it comes to the Nasdaq 100 and QQQ, early year action can prove to be gospel for the entire year.
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When the Nasdaq-100 was positive in the first quarter of the year, it set a positive tone for the remainder of the year. The index ended the entire year higher in every instance except for one, which happened to be the market sell-off of 2000. The median annual performance in a year with a positive first quarter is a remarkable 36.9%, according to a note from Nasdaq Global Indexes out Monday.
That is impressive, but investors probably should not bank on QQQ finishing 2015 higher by almost 37 percent as the ETF entered Monday with a year-to-date gain of about 8.7 percent. Stranger things have happened, but asking for QQQ to more than quadruple in just five months is probably asking for a lot.
What augers well for QQQ's chances of finishing 2015 in the green is the combination of the ETF's bullish first- and second-quarter showings.
The frequency of positive second quarters is greater with 17 occurrences since 1990. In only three instances did the Nasdaq-100 trade lower for the year: 1990, 2001, and 2008. Overall, the median annual gain for the Nasdaq-100 following a positive second quarter is just slightly over 20%, according to Nasdaq.
The Nasdaq 100 was up almost 1.8 percent in the second quarter this year, according to Nasdaq data. This is where things get interesting and arguably tempting though unreasonable when it comes to what to expect out of QQQ for the rest of 2015. Nasdaq data indicate there have been nine past occurrences when the Nasdaq-100 was positive in both the first and second quarters, and in every occurrence the Nasdaq-100 finished the year higher with a median gain of over 42.5%.
For QQQ to sniff anything resembling a 42.5 percent year-to-date gain, it is going to need some other big contributions from others stocks. To this point in the year, Amazon.com, Inc.(NASDAQ:AMZN), Apple Inc.(NASDAQ:AAPL), Facebook Inc (NASDAQ:FB), Gilead Sciences, Inc. (NASDAQ:GILD), Google Inc(NASDAQ:GOOG) and Netflix, Inc.(NASDAQ:NFLX) combine for overhalf of QQQ's gain.
Old guard tech names could push QQQ and the Nasdaq 100 higher, assuming those stocks start getting their respective acts together. For example, Microsoft Corporation(NASDAQ:MSFT) is up just 2 percent this while Cisco Systems (NASDAQ:CSCO) is higher by 4.5 percent. Shares of Intel Corporation(NASDAQ:INTC) are off 19 percent year-to-date. Those stocks combine for 12.5 percent of QQQ's weight.
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