The Nasdaq-100® and S&P 500 are two of the most popular equity indexes in the U.S. The Nasdaq-100 is heavily allocated towards top-performing industries such as Technology, Consumer Discretionary, and Health Care, which have helped the Nasdaq-100 outperform the S&P 500 by a wide margin between December 31, 2007 and June 30, 2022. Below is a comparison of annual total returns—which reinvest dividends—between each index. The Nasdaq-100 TR Index has outperformed 11 out of the 14 full calendar years in our study, with a minimal underperformance of 1.20% in 2021. (On a price-return basis, 2021 was a near-tie, with the Nasdaq-100 underperforming by only 0.26%).
Despite recent overall market volatility, the Nasdaq-100 TR Index has maintained cumulative total returns of approximately 2.2 times that of the S&P500 TR Index.
Rolling Volatility (One Year)
One-year rolling volatility (calculated by taking the standard deviation of daily returns, annualized) of the Nasdaq-100 has been modestly elevated vs. the S&P 500, averaging only 2.35% higher between Dec. 31, 2009 and June 30, 2022. The overall correlation of daily returns was 93%—rather impressive given the concentrated exposure of the Nasdaq-100 towards Technology.
Current Industry Weights
We can see important differences in sector exposures between the Nasdaq-100 and the S&P 500 as of June 30, 2022. As mentioned previously, the outsized allocations to both Technology and Consumer Discretionary have helped propel the Nasdaq-100 Index to multiple new all-time highs since the Covid-19 pandemic, most recently in mid-November 2021.
The Nasdaq-100 finished the second quarter of 2022 with a YTD loss of 29.22% compared to the S&P 500 loss of 19.96%, during a period of heightened volatility and widespread equity market weakness. While notable, this underperformance of 926 bps pales in comparison to 2020’s incredible 3,000+ bps of outperformance, as well as the long-running outperformance trend dating back to 2009. The Nasdaq-100 is heavily allocated toward top-performing industries such as Technology, Consumer Discretionary, and Health Care. The long-run growth trend of companies in these industries has persisted in spite of the widespread economic disruption from the COVID-19 pandemic and remains generally strong even in the face of rising inflation and interest rates. Given the way technology is influencing the world and making companies more efficient, there is a strong possibility that this trend will continue into the future, despite the occasional interruption, as we most recently witnessed in 1Q’20 and 4Q’18.
Sources: Nasdaq Indexes, Bloomberg
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