S&P 500's Projected EPS Growth In 2024: Why QQQ, QQQM Might Lead The Way

The S&P 500 Index is forecasted to deliver a double-digit increase in earnings per share (EPS) in 2024. This is good news for those invested in funds that closely track this index such as the SPDR S&P 500 ETF SPY, the Vanguard S&P 500 ETF VOO or the iShares Core S&P 500 ETF IVV.

However, not all sectors may experience similar growth rates. This variance is what often prompts investors to seek opportunities that encompass multiple high-growth sectors in a single fund.

Why QQQ Could Outpace SPY In EPS Growth?

For 2024, the sectors driving double-digit EPS growth, according to FactSet’s John Butters include:

• Healthcare – broadly tracked by the SPDR Select Sector Fund – Health Care ETF XLV
• Communication Services – tracked by the Communication Services Select Sector SPDR ETF XLC
• Information Technology – tracked by the SPDR Select Sector Fund – Technology ETF XLK

Investors have the option to either focus their investments in these sector-specific ETFs for more comprehensive exposure within a particular sector, or they can choose a broad market ETF that leans towards allocations in these sectors.

Enter the Invesco QQQ Trust, Series 1 ETF QQQ and the Invesco NASDAQ 100 ETF QQQM. Both these ETFs track the Nasdaq 100 Index.

The QQQ and QQQM ETFs have a substantial allocation, around 69.95% to the healthcare, tech and communication services sector (last updated on Jan. 5, 2024):

• Technology Services: 33.07%
• Electronic Technology: 28.22%
• Health Technology: 7.12%
• Communications: 1.53%

On the other hand, the SPY ETF has a 47.86% allocation towards the these sectors:

• Technology Services: 19.81%
• Electronic Technology: 17.47%
• Health Technology: 9.65%
• Communications: 0.93%

Also Read: S&P 500 Stuck In 4,600-4,800 Limbo For 2024? Wells Fargo Pinpoints 3 ‘Favored Sectors’ For Next Year

This indicates that the QQQ and QQQM ETFs may be better poised to benefit from S&P 500 EPS growth compared to the S&P 500 funds themselves. Historically, the Nasdaq-100 Index has shown stronger EPS growth than the S&P 500.

The projected EPS growth is anticipated to accelerate notably throughout 2024, particularly in Q4 2024. QQQ and QQQM are heavily invested in the healthcare, technology, and communication services, which are expected to be key drivers of the S&P 500’s EPS and revenue growth for the year.

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