Key Points

• Risk assets continued to rally in May on the ongoing de-escalation of trade tensions between the U.S., China, and the European Union. The Nasdaq-100 Index® (NDX®) returned 9% in May and is +1.6% YTD.
• While trade tariffs will still be a headwind for business activity and further clarity is needed, investors pivoted back to the fundamentals as NDX Q1 2025 EPS grew 21% YoY vs. expectations of 17.4% YoY.
• Performance across Nasdaq’s suite of indexes finished sharply higher for May with 97% of the indexes tracked in our report posting gains, and the average index up 6%. Notably, the Nasdaq Ether Settlement Price^TM Index (NQETHS^TM) was the best performing index in May up by 44% though it is still -22.8% YTD.

Chart of the Month
 

Out of the 97 NDX companies (representing 94% of the index weight) that reported results, 80 beat EPS consensus estimates. 74 companies reported revenue that beat estimates.  This represents 82% and 76% of NDX, respectively, as measured by the number of companies.  89% and 86% of the index weight of companies reported beating EPS and revenue estimates, respectively.

Source: Factset, Nasdaq Index Research

Executive Summary

After equity volatility, as measured by the CBOE Nasdaq-100 Volatility Index (VXN), hit its highest level since the depths of Covid in March 2020 on April 9^th (52.2), it is now back to its 10-year average of around 22.3. In addition to expectations that the trade tariffs will have a less onerous impact on economic and corporate activity versus early April, U.S. economic data has been broadly resilient despite ongoing weakness in sentiment indicators. The Citi U.S. Economic Surprise Index—measures hard and soft economic data surprises relative to market expectations—is near a four-month high of 13.20, indicating more positive surprises than negative surprises versus estimates. However, downside growth risks remain given ongoing trade policy uncertainties. Consensus Bloomberg 2025 U.S. real GDP forecasts have fallen from 2.30% YoY to 1.40% YoY.

Appreciating that financial markets can only fully focus on one dynamic at a time, the second half of May saw investors react to higher Treasury 10-year yields. Yields had initially risen following the early May news of a U.S.-China trade reprieve of most tariffs for 90 days. However, in addition to ongoing higher inflation expectations on account of expected trade tariffs, there have been increased concerns over wider U.S. fiscal deficits leading to even higher debt levels. These were accentuated by the progress of the One Big Beautiful Bill Act (“OBBBA”) and, in addition to concerns around a weaker Treasury 20-year auction recently, pushed Treasury 10-year yields to 4.60%—their highest since mid-February. Additionally, there has been a gravitational pull in longer-dated government yields globally as fiscal concerns and widening budget deficits are not reserved only for the U.S.—e.g., Japanese 30-year yields hit their highest on May 22^nd in data going back to 1999.

Pivoting from the top-down dynamics, going forward, corporates earnings will start reflecting the economic realities from trade tariff impacts. While there has been much noise on the macroeconomic and fiscal policy front this quarter, NDX has continued to outperform, with a blended year-over-year growth in Q1 2025 earnings of approximately 21.0% which is better than the predicted growth rate of 17.4% and is also substantially better than the 13.5% EPS growth reported for the S&P 500. With 97% of NDX companies having reported Q1 2025 earnings, 82% beat EPS estimates and 76% beat their sales estimates. AI Capex spending is on track to exceed $300 billion in 2025 vs $150 billion in 2022. Guidance and revisions from Microsoft (Nasdaq: MSFT), Amazon (Nasdaq: AMZN), Alphabet (Nasdaq: GOOG and GOOGL) and Meta (Nasdaq: META) and others have been steady to higher.

Nasdaq Indexes May 2025 Performance Recap

Among the 122 indexes tracked in this report, 118 finished May in positive territory, while 4 ended with negative returns. The best-performing index was the Nasdaq Ether Settlement Price^TM Index (NQETHS™), delivering a return of 44%. The worst performance was from the Dorsey Wright Healthcare Tech Leaders^TM Index (DWHC™) which lost –8.5% for the month. The average return across all 122 indexes for the month was +6%.

Nasdaq Featured Indexes

All 13 of the Nasdaq Featured Indexes registered positive returns in May as the market rally was widespread. The Nasdaq-100 Mega™ Index (NDXMEGA™) was the top performer, registering a return of 13.2% while the Nasdaq-100 Low Volatility™ Index (NDXLV™) was still positive but was the bottom performer with a gain of 2.6%. The continued strong recovery of mega cap stocks helped the Nasdaq-100 Index® (NDX®) as it was up 9%. The Nasdaq-100 Equal-Weighted™ Index (NDXE™) also fared well as it was up 6.7%. The Nasdaq-100 Top 30™ Index (NDX30™) rose by 10.1% and the Nasdaq-100 ex Top 30™ Index (NDX70™) returned 5.4%. Overall, this group of indexes was up an average of 6.9%.

Nasdaq Global Indexes

Performance across the Nasdaq Global Indexes suite was positive. The Nasdaq US Large Cap™ Index (NQUSL™) was the best performer, rising 6.6%. The Nasdaq Global™ Index (NQGI™) was up 5.6%. This was comprised of the Nasdaq Developed Markets™ Index (NQDM™) which rose 5.7% and the Nasdaq Emerging Markets™ Index (NQEM™) which had a return of 4.6%. The group's lowest return index was the Nasdaq Europe™ Index (NQEU™) with a return of 4%. All 9 indexes in the group had positive returns for May.

Nasdaq Sector-Specific Indexes

Within Nasdaq’s sector-specific indexes, the KBW Nasdaq Bank™ Index (KBW™) was the top performer, registering a positive return of 8.2%, as the U.S. yield curve steepened (a steeper yield curve is generally favorable for banks). The PHLX Gold/Silver Sector™ Index (XAU™) was up 2.5% as spot gold price hit another all-time high intra-month due to its role as a safe-haven asset and an inflation hedge. Per EPFR data via Bank of America Merrill Lynch, gold had its third weekly largest outflow and its largest since April 2013 as spot gold prices have moderated after repeated record highs. The KBW Premium Yield Equity REIT™ Index (KYX™) was the laggard in the group, up 0.8%.

Nasdaq Thematic Indexes

Overall performance across the Nasdaq Thematic Tech lineup was positive with 24 out of the 25 indexes in the suite recording gains, averaging 7.8%. The best performing index in the group was the PHLX Semiconductor™ Index (SOX™) with a return of 12.5% aided by strong contributions from NVIDIA Corp. (Nasdaq: NVDA, SOX weight of 13.03%) and Broadcom Inc. (Nasdaq: AVGO, SOX weight of 12.19%). The Nasdaq Biotechnology™ Index (NBI™)was the worst performer, registering a loss of -4.31% due to industry idiosyncratic trends (e.g. new FDA not properly staffed to keep up with typical pace of new drug approvals, new HHS policy is more hostile to vaccines generally, higher interest rates, and the recent emergence of China as a real biotech competitor to US firms).

Twelve indexes in the Nasdaq Thematic Renewables and Energy Transition Materials suite posted gains this month, with an average return of 6.5%. The standout in the group was the Nasdaq Sprott Nickel Miners™ Index (NSNIKL™) which was up 18.3%. The Nasdaq Sprott Lithium Miners™ Index (NSLITP™) was the worst performer again in May, registering a loss of -6.5%.

The Nasdaq Crypto Index suite had an average gain of 20.7% powered by the Nasdaq Ether Settlement Price™ Index (NQETHS™), the best performing index, rising 44%. The Nasdaq Bitcoin Settlement Price™ Index (NQBTCS™) had the lowest return of the group at +11.2%. As cited last month, amidst a steadily weakening USD given U.S. policy and federal deficit concerns, Bitcoin has benefited as a form of “digital gold”. Overall, crypto funds took in $2.3 billion in the latest week’s data per Bank of America Merrill Lynch, taking cumulative inflows since 2019 to around $63 billion. Specifically, with around $72 billion in AUM, BlackRock’s iShares Bitcoin ETF (IBIT) is the eighth largest iShares product—and it was only launched in January 2024. Per Bloomberg, IBIT had its largest-ever monthly net inflow in May, taking in over $6.35 billion.

Nasdaq Quantitative Indexes

Across the index suites comprising Nasdaq’s quantitative offerings, performance was mostly positive with 50 out of the 52 indexes seeing gains in May. The average return was 4.1%. Nine out of 10 indexes in the Nasdaq Options & Other Quantitative suite saw gains, and all eleven Nasdaq Multifactor indexes were positive this month. Within the Dorsey Wright momentum suite, the Dorsey Wright Technology Tech Leaders™ Index (DWTY™) was the best performer, gaining 8.9%. The Dorsey Wright Healthcare Tech Leaders™ Index (DWHC™) was the worst performing index at -8.5%.

All 15 indexes in the Nasdaq Dividend and Income suite posted gains this month, with an average return of 4.1%. The Nasdaq Technology Dividend™ Index (NQ96DIVUS™) was the top performer, posting a return of 10.5%. The worst performer in the group was the Nasdaq US Multi-Asset Diversified Income™ Index (NQMAUS™), up 0.2%.

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