The Nasdaq-100® and S&P 500 are two of the most popular equity indexes in the US. 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 December 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 15 calendar years in our study, with an underperformance of -14.3% in 2022. This was by far the most significant underperformance observed in our study, driven by global weakness in Growth stocks.
Despite recent overall market volatility, the Nasdaq-100 TR Index has maintained cumulative total returns of approximately twice that of the S&P500 TR Index.
|Nasdaq-100 TR||S&P 500 TR|
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 2.52% higher between December 31, 2007 and December 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 December 30, 2022. As mentioned previously, the outsized allocations to both Technology and Consumer Discretionary have helped propel the Nasdaq-100 Index to multiple years of outperformance over the past decade and a half.
The Nasdaq-100 finished the fourth quarter of 2022 with a full-year loss of 32.4% compared to the S&P 500 loss of 18.1%, during a period of heightened volatility and widespread equity market weakness. While significant, this underperformance pales in comparison to the long-running outperformance trend dating back to 2009. The Nasdaq-100 is heavily allocated towards 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 continues into the future despite occasional interruption, as we most recently witnessed in 1Q’20 and 4Q’18.
Sources: Nasdaq Indexes, Bloomberg
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