The Role of Indexes in the Financial Ecosystem

Talking Trends

The origins of global financial indexes date back to the 1880s, when they emerged in Paris, London, Hong Kong, New York, and elsewhere as statistical snapshots of economic activity during the industrial revolution to track key sectors such as railroads and manufacturing. According to the Index Industry Association, there are over three million financial indexes globally, and there are many use cases across both passive and active management, including benchmarking, financial product construction, asset allocation, research, regulatory compliance, and other purposes.

Mark Marex, Head of Index Research for the Americas at Nasdaq, Paul Schroeder, Director of Factor & QQQ Equity Product Strategy at Invesco, and Kirsten Wegner, CEO of the Industry Association, join Nasdaq TradeTalks to discuss the role of indexes in the financial ecosystem and product landscape and how it allows for investor choice and innovation. With further developments in technology, and the rapid rate of innovation, indexes can and will continue to play an important role in bringing greater transparency and critical tools to a changing investment landscape.

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As the Head of Index Research for the Americas at Nasdaq, can you explain how Nasdaq monitors and responds to macroeconomic events or geopolitical shifts that may impact the Nasdaq-100®'s composition or performance?

One of the things that the team does in terms of covering the Nasdaq-100® from a research perspective is we put together the NDX Weekly newsletter, which provides market participants with a comprehensive suite of index research specific to the Nasdaq-100 laid out over the course of a quarterly content calendar. It covers the Nasdaq-100 from every conceivable angle that may impact the performance and evolution of the index, from fundamental drivers like earnings and technical analysis, such as momentum, to macroeconomic developments like trade policies and thematic drivers like artificial intelligence. This is the Nasdaq Index Research team’s foundational piece of content that we create every single week, but we also create accompanying video content for people in the audience who are interested in consuming it that way.

In your recent TradeTalks interview, you noted that the alternative strategies within the Nasdaq-100 Index are the “fastest growing segment” within the U.S. ETF industry. Can you elaborate on what’s driving the growth of these strategies and why they are attractive to investors?

When you look at the growth of different segments of the ETF industry, defined outcome ETFs have seen the fastest annualized growth rates over the last five years. Defined outcome is a fancy way for describing the use of options to produce some specific type of result for investors, whether that is enhancing income, providing some downside protection, enhancing growth or some combination of two or three of those.

That defined outcome growth story has certainly been the case for Nasdaq too, which already has grown from just a few billion in AUM five years ago, to more than $60 billion today in the Nasdaq-100 Options ETF suite. We've seen incredible success from products like JEPQ, which is JP Morgan’s actively managed ETF in this space, as well as some passively managed products like QYLD and IQQQ. These latter two deliver covered-call strategies around the Nasdaq-100 using differing lengths of option tenors to basically generate income by systematically selling calls against the index at a fully passive level.

There's a ton of innovation and creativity happening in this space because there's so many different types of options strategies out there. In the last few years, we've seen this market really explode, going from basic first-generation option strategies like covered call, to trying to deliver more sophisticated strategies that used to not be available to the everyday investor but now are increasingly found in a lot of different ETFs being launched by clients of ours, such as Invesco, First Trust, Calamos, NEOS, and Innovator.

In another discussion on TradeTalks, you mentioned that macro factors, such as changes in fiscal and trade policy, had a measured impact on the index in the beginning of the year. As we head toward year-end, what’s your outlook for the Nasdaq-100’s performance?

We don't officially issue outlooks, but we do look at a number of data points that are forward-looking, including analyst estimates of the individual companies that make up the index, as well as top-down estimates for earnings growth for the index. Historically, earnings growth at the top level for the index is the thing that is most closely correlated with long-run performance. What we've seen in recent quarters is robust earnings growth to the tune of 15%, 20%, 25% year-over-year growth — even as high as 35% in the 2Q’25 earnings season. This is above the historical average, which is approximately 10%-15% over the past two decades, and so the continuation of strong performance this year is not surprising when you look at that resilient earnings story in the face of what's been a very noisy year in terms of macroeconomic news — between tariffs and trade wars and uncertainties at the Fed and how fiscal policy is going to evolve in the U.S.

Now that we're halfway into November, it does look like it's going to end up being another very strong year performance wise, up more than 20% for the third year in a row, which, again, is not surprising when you look at what's been happening at the fundamental level.

This article was originally our TradeTalks newsletter. Sign up here to access exclusive market analysis by a new industry expert each week. We also spotlight must-see TradeTalks videos from the past week.