Down 27% this year, is the Betashares Nasdaq 100 ETF (NDQ) a buy before 2023?

It has been a very disappointing year for the Betashares Nasdaq 100 ETF (ASX: NDQ).

This highly popular exchange-traded fund (ETF) has been hammered this year after a tough period for the 100 shares it holds.

As you can see below, the Betashares Nasdaq 100 ETF has lost 27% of its value since the start of the year.

Why has the NDQ ETF been hammered?

The Betashares Nasdaq 100 ETF has been sold off this year for a few reasons.

As mentioned above, the fund’s underlying holdings have been hit hard this year and this has weighed heavily on the ETF. After all, the ETF provides investors with exposure to these shares, so if they collectively fall, then the ETF will do likewise.

These shares have tumbled lower this year due to rising interest rates to combat inflation, economic growth concerns, and a rotation out of growth stocks.

With respect to rising interest rates, these have a negative correlation with price-to-earnings multiples. When interest rates rise, multiples reduce, and vice versa when they fall.

That’s because if an investor can, for example, earn 4% risk-free on a term deposit, they will require a much greater potential return from an asset that carries risk. Unfortunately, the only way that this is possible is if the share is trading on a lower multiple and, therefore, offers a more compelling risk/reward.

If you then throw in concerns over the global economy, the risk increases and the multiples that investors are prepared to buy shares at lower accordingly.

Will 2023 be different?

While there is still a chance the Betashares Nasdaq 100 ETF could fall further before rebounding, I believe the market has now fully priced in future interest rate increases and economic growth concerns.

In light of this, I think now could be one of the best buying opportunities for investors in years.

Key constituents of the Betashares Nasdaq 100 ETF such as Alphabet (Google), Amazon, Apple, Microsoft, and Tesla are down materially this year, but their long-term outlooks remain as positive as ever.

When interest rates and inflation finally settle, I expect investors to flood back in and drive their beaten-down share prices higher, lifting the Betashares Nasdaq 100 ETF along with them.

The post Down 27% this year, is the Betashares Nasdaq 100 ETF (NDQ) a buy before 2023? appeared first on The Motley Fool Australia.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor James Mickleboro has positions in BetaShares Nasdaq 100 ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon.com, Apple, BetaShares Nasdaq 100 ETF, Microsoft, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has positions in and has recommended BetaShares Nasdaq 100 ETF. The Motley Fool Australia has recommended Alphabet, Amazon.com, and Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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