Special Report: In this Stockhead series, Josh Gilbert – market analyst at global investment platform eToro – gives investors the scoop on all things Nasdaq related; the key market themes, along with popular investment trends based on eToro’s data and insights.

After a sharp selloff to start December, the Nasdaq posted three straight solid gains to start this week as big tech stocks led a broader market rebound.

Among other factors, market sentiment appeared to get a boost from indications that the Omicron COVID-19 variant isn’t dangerous enough to put a clamp on the reopening trade.

However, Gilbert said investors shouldn’t go into cruise control just yet, after US Fed chair Jerome Powell’s comments showed how sensitive markets are to the outlook for monetary policy.

The volatility trade

“I still think there is more volatility to come before year-end,” Gilbert says.

Right now, there are still lingering concerns about how the Omicron variant could impact global growth — and that’s combined with a newly hawkish US Fed that is threatening to accelerate its monetary tightening policy.”

In additions, “investors have to contend with inflation running red hot”, Gilbert noted.

“We will get a new inflation print from the US on Friday, but it’s expected to come in around 6.9% — the highest level in 30 years.”

By the same token, while there are plenty of pending catalysts to keep investors on alert, that doesn’t mean it’s time to run for the exits.

“Although we expect volatility, we remain positive on markets,” Gilbert says.

“The growth outlook is still strong, and economies are more and more resilient to each virus wave.”

On that front, Gilbert said trading data from eToro indicates most traders on the platform take a longer-term view with their investment horizon.

And if volatility does pick up, the famous tech names that have become synonymous with the Nasdaq are actually well placed to whether the storm.

“If anything, investors will most likely be looking to add Big Tech to their portfolio for 2022,” Gilbert said.

These companies have built up ‘fortress’ balance sheets, and the structural growth trends that have underpinned post-COVID growth for lots of US tech stocks are still there.”

Sector to watch

After flagging US semiconductor stocks last week, Gilbert said cybersecurity is another key sector to watch heading into 2022.

“With features like online video conferencing, Cloud transformation, remote-working, and the sheer threat of cyber-attacks, I believe cybersecurity is being seen as a critical budget for businesses,” he said.

As a measure of its increasing importance among both businesses and policy makers, Gilbert also noted that the Biden administration’s infrastructure bill that was signed into law last month – which allocated almost US$2bn to cybersecurity and relation provisions.

In that context, there are plenty of Nasdaq-listed companies that give investors exposure to the US cybersecurity thematic.

“Names such as Crowdstrike (NSDQ: CRWD), Zscaler (NSDQ: ZS), Palo Alto Networks (NSDQ:PANW) and Fortinet (NSDQ:FTNT) are all companies that could play a key role in cyber security over the next decade,” Gilbert said.

“For a diversified approach, investors could also look at eToro’s Smart Portfolio, ‘CyberSecurity’, which provides exposure to a range of stocks in the cybersecurity sector.

This article was developed in collaboration with eToro, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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