QQQ Posts a New High to Begin Q4
The week wasokay for stocks and tough for bonds again. Last week, I discussed the 4th quarter ahead, right before the end of Q3.
A Look at the Market
The S&P 500 has returned 13.8% with dividends included, and the price is up 12.9% for SPDR S&P 500 ETF (SPY) in 2026 so far. This leaves the market on track to post a return for the full year right at 18%. At the same time, iShares Core US Aggregate Bond ETF (AGG) has declined in price in 2026. With dividends included, the return has been -2.7%, which is well below cash.
In the Q3 review, I pointed to the end-of-the-quarter strength in semiconductors and Bitcoin as well as the weakness in bonds. This week ended the third quarter but started the 4th quarter. For the week, semiconductors soared, gaining 2.8% for SOXX and 3.9% for SMH, which has more NVDA, extending their year-to-date large gains. While SPY failed tom make a new high, it's not that far from its all-time high set in mid-August. QQQ posted a new all-time high today, though it's not that far above its previous all-time high set in early June.
Looking at the S&P 500 by sector, XLK, the Technology sector, also posted a new all-time high today. As I pointed out in the Q3 review, two sectors are doing very well this year, Technology and Energy, which also rose this week (1.8%). These are the only two of the eleven sectors that have outpaced the S&P 500.
I pointed out the four sectors that had negative total returns year-to-date as of 9/30, and that remains the case. The worst has been Consumer Discretionary, and XLY fell again this week. Even worse this week were Communications (XLC) and Financials (XLF). XLU, the fourth one, had a slightly positive total return this week.
So, it looks like the chasers were chasing again. I pointed out last week the big pullbacks in mid-caps and small-caps, and, while MDY bounced sharply, it did fall during the week, though less than SPY. IWM bounced to begin October, but it fell more than SPY during the week. Here is a year-to-date return chart for these three ETFs and for QQQ:
QQQ is winning, but it is not really the best deal in my view. It is being fueled by semiconductor stocks, which have not made a new high. The largest names in QQQ pretty much match the largest names in SPY and include NVDA, AAPL, MSFT, MU, AMZN, AMD, GOOG, META and TSLA, and these total about 47% of the ETF. NVDA, MU and AMD are all semiconductor companies. Most of these are Magnificent 7 stocks, which have been rebounding.
At the beginning of the year, the Magnificent 7 (or Elite 8) were under pressure, but they have rebounded somewhat. IWM and MDY have pulled back a lot, and these are in the same market-cap ranges as the two ETFs that I currently include in the model portfolio.
ETF Model Portfolio Update
This ETF model portfolio, which is measured against 60% SPY and 40% AGG, is down slightly year-to-date relative to its benchmark. This week, I did a few trades that were published here instead of on my Seeking Alpha blog. For those who would like real-time alerts (free of charge for now), just subscribe to the blog.
I shared a Q3 ETF Review, and I posted just one article on ETFs or stocks this week at Medium:
I did write about a Senate candidate who wants to ban share repurchases at Medium too. If anyone wants access to it, let me know so that I can give you access.
Going into the week, my model portfolio equity exposure totaled 48.7%, spread out across three ETFs. Here is what I did this week:
Tuesday: I reduced Vanguard Short-Term Treasury Index ETF (VGSH) and added to ProShares S&P MidCap 400 Dividend Aristocrats (REGL) and to PIMCO 15+ Years TIPS ETF (LTPZ).
Wednesday: I exited Vanguard Short-Term Treasury Index ETF (VGSH) and added to ProShares S&P MidCap 400 Dividend Aristocrats (REGL).
Thursday: I exited ProShares S&P 500 Dividend Aristocrats ETF (NOBL) and reestablished a position in Utilities SPDR ETF (XLU).
Friday: I exited XLU and added to iShares TIPS Bond ETF (TIP).
Here is the current model portfolio, which now has 49.8% equity exposure in two ETFs and fixed income exposure in two TIPS ETFs that total 49.8% too:
I have been wrong this year, at least so far, as stocks keep rallying. The rally had been until Friday more than three months ago (June 5th), when stocks had their worst day of the year. Since then, the S&P 500 and the Russell 2000 have made new highs, though not so recently. Being underweight stocks all year, my return relative to the 60/40 index is lower by about 0.% injust over 9 months. As the S&P 500 fell and the Aggregate Bond Index fell harder again, the model portfolio, which was down a bit more, underperformed the index. This is due to weakness in smaller stocks relative to larger ones as well as weakness in TIPS.
The early year-to-date strong relative performance was not due to superior returns on the equity ETFs. My TIPS ETFs have done reasonably okay relative to AGG, at least until very recently, but they aren't exactly boosting the return. I have had positive returns from three ETFs, two of which I no longer hold and one of which is down a lot year-to-date that I just repurchased recently, and there has been some good trading that has helped me with a bad overall asset allocation weighting.
How I Can Help You
I enjoy analyzing ETFs and stocks, and I like sharing my thinking in writing. I was considering starting a subscription service or joining one that is already being published. What things would you as an investor like to see offered?
If you are an investment professional, I would like to work with you as well. I can help educate financial consultants about the ETFs, and I can work with management at investment firms to help create model portfolios or potential ETF investments. Please let me know if your firm would be interested in this.
My ETF articles at Seeking Alpha, written under the alias The Intelligent ETF Investor, shared a lot of my ideas. I continue to share those ideas here on this blog.
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