AI Generated Image
It's Not Worth Buying VOO Or QQQ Anymore
Seeking Alpha • • business
Key Points:
- The author, who has long held significant positions in Vanguard 500 Index ETF (VOO) and Invesco QQQ Trust ETF (QQQ), now expresses concerns about continuing to invest in these funds due to high valuations and changing market conditions.
- Despite a seemingly reasonable forward P/E ratio of 19.6x, the Shiller CAPE ratio stands at 42.38x, the second highest since 2000, indicating potentially overvalued market levels.
- Q2 earnings growth appears less robust when excluding large unrealized gains from Alphabet and Amazon, dropping from 52% to 33.8%, which may impact future forward estimates negatively.
- The top 10 holdings constitute a significant portion of both ETFs and are linked to substantial capital expenditures ($725 billion projected for 2026), much of which is increasingly financed through credit, raising financial risk concerns.
- Given the current economic environment, with core PCE inflation at 3.3%, a 10-year Treasury yield near 4.79%, and a narrow equity risk premium of about 30 basis points, the author prefers to allocate new investments elsewhere for better risk-adjusted returns.
