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Published on 20 Jan 2022 on Zacks via Yahoo Finance

Nasdaq in Correction: ETF Strategies to Play


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The Nasdaq, heavy on technology and growth stocks, is now off 10% from its November record, ensuring the fact that it has entered a correction territory. The Nasdaq Composite has lost 8% this year as investors continue to walk out of the high-growth tech shares as interest rates surge to start the new year.

There are heightened rising rate worries as the Fed is expected to hike rates in March to contain a sky-high inflation. Investors are wagering on 89.9% chances of a 25-bp interest rate hike in March, according to CME Group's FedWatch Tool, and a 48.4% chance that rates will rise again by 25 bps in May and 43.9% probability that the rates will hover around 75-100 bps after the Fed’s June meeting. About 45.1% believe that 75-100 bps of rates will be seen after the meeting in July. If this happens, there will be three Fed rate hikes in the coming six months (read: Bet on Inverse Treasury ETFs Now to Play Rise in Yields).

President Joe Biden also said he favors Federal Reserve Chairman Jerome Powell’s expected move to start tightening monetary policy. Benchmark U.S. treasury yield jumped to 1.87% on Jan 18, 2022 (this year’s high so far) from 1.63% from the start of the month. No wonder, high-growth stocks will take a beating. Growth stocks’ valuations swelled during the pandemic thanks to ultra-easy monetary policies.

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