Key Points

• Following a spike in volatility and an abrupt drop in equities to start the month, August saw equity markets recover all of their losses on alleviating economic concerns and on the prospects of the Federal Reserve beginning to cut rates in September.
• There were pockets of strength in the suite of Nasdaq indexes with select cybersecurity, digital payments, financial sector, and dividend & income indexes registering strong-to-moderate performance. Several indexes focused on small cap companies struggled, along with cryptocurrencies.
• With the sentiment towards AI cooling and lingering concerns of an economic slowdown, there continues to be interest in overlooked areas of the market. 

Chart of the Month

Source: Bloomberg

Executive Summary

The Nasdaq suite of indexes registered an average gain of 0.9%, after a difficult start to the month for the broader markets and the equity volatility (VIX Index) having its largest intraday spike in history on August 5^th. Concerns around economic growth and the unwinding of the yen carry trade weighed on market participants in the early weeks of August. However, while economic concerns linger, recent data has been steadier. Coupled with the ongoing loosening in the labor markets and lower inflation trends, this mix has reinforced prospects of rate cuts at the Federal Reserve’s next meeting on September 18^th—cemented by Fed Chair Jerome Powell’s speech at the annual Jackson Hole Economic Symposium at the end of August. This loosening of financial conditions—e.g., U.S. Treasury 10-year yields hitting their 2024 lows in August; markets currently pricing in a 1% decline in the Fed Funds rate by year’s end—helped with the ongoing rebound in risk assets as U.S. equity funds have experienced inflows for eight consecutive weeks through the end of August per EPFR data. The sentiment towards global tech and AI-related stocks continues to be moderately negative, as some leading incumbents including Alphabet (Google), Amazon, and Nvidia saw declines due to underwhelming earnings reports and ongoing investor concerns around the outlook for investments and expenses. With optimism surrounding AI cooling, investors are showing signs of pivoting to other areas of the market. The Nasdaq-100^® (NDX^®) rose 1.1%, after a challenging July when multiple headwinds weighed on returns.

Nasdaq Indexes July 2024 Performance Recap

Among the 119 indexes tracked in this report, 95 finished in positive territory, while 24 ended the month in negative territory. The average return across all indexes was 0.9%.

Nasdaq Featured Indexes

Seven out of nine Nasdaq Featured Indexes registered modestly positive returns in the month of August. Within the Nasdaq Featured Indexes, Nasdaq Q-50™ Index (NXTQ™) was the top performer, registering gains of 2.0%. The small-cap Nasdaq Innovators Completion Cap™ (NCX™), which was the best performer last month, saw a reversal in performance, registering losses of 3.2%. On average the group was up 0.6%.

Nasdaq Global Indexes

The Nasdaq Global Indexes registered an average gain of 2.1% in August. Nasdaq Europe™ (NQEU™) was the best performer, registering returns of 3.4%. A drop in Eurozone inflation affirmed expectations for a rate cut in September, bolstering markets. Nasdaq US Small Cap™ (NQUSS™), which was the best performer in the previous month, saw a reversal in performance, registering losses of 1.1%; it was the only index in the group to register negative performance. While more recent economic data has been steadier, the ongoing fears that the economy might be slowing faster than expected drove underperformance. Nasdaq US Mid Cap™ (NQUSM™) saw gains that were more muted when compared to the previous month. Nasdaq ASPA Ex Japan™ (NQASPAXJP™) and Nasdaq Emerging Markets™ (NQEM™) saw higher returns when compared to the previous month—the latter benefiting from an ongoing weakening of the U.S. dollar given expectations of the aforementioned Federal Reserve rate cuts.

Nasdaq Thematic Tech Indexes

Performance was largely positive for the suite of Nasdaq Thematic Tech Indexes, with all but three indexes registering positive returns. As a group, the indexes registered positive returns of 2.5%, on average. Nasdaq Lux Health Tech™ (NQHTEC™) was the top performer, registering gains of 6.4%, followed closely by Nasdaq CTA Cybersecurity™ (NQCYBR™) registering gains of 6.3%. Two other cybersecurity indexes, Nasdaq ISE Cyber Security Select™ (HXRXL™) and ISE Cyber Security UCITS™ (HUR™) registered impressive gains as well, of 5.1% each. Fortinet, Crowdstrike and Trend Micro were up by 32.2%, 19.5% and 24.0% respectively, contributing the most to the outperformance of the cybersecurity indexes in the month of August. Another area of strength was the trio of fintech indexes, including Nasdaq CTA Global Digital Payments™ (WALLET™),  KBW Nasdaq Financial Technology™ (KFTX™) and ISE Mobile Payments™ (IPY™), registering gains of 5.7%, 5.2% and 5.0%, respectively. Semiconductors, however, struggled in August, with Nasdaq US Smart Semiconductor™ (NQSSSE™) and PHLX Semiconductor™ (SOX™) registering losses of 2.1% and 1.4%, respectively. Intel contributed the most to the underperformance of the two semiconductor indexes. It posted declines of 28.3% in August, driven by the suspension of its dividend, announcement of major layoffs, and tepid guidance, all a function of its struggles to compete with other chipmakers in the artificial intelligence space.

Nasdaq Thematic Renewables and Energy Transition Materials

The suite of indexes came under pressure in August, with average losses of 1.5%. Nasdaq Sprott Junior Uranium Miners™ (NSURNJ™) was the worst performer this month, registering losses of 12.8%. Indexes riding the energy transition theme, which came under pressure last month, continued to be challenged this month with four of six indexes registering losses and two other indexes eking out modest gains. The rest of the indexes in the group eked out modest gains when compared to last month, with the exception of Nasdaq Clean Edge Green Energy™ (CELS™) registering losses of 3.8% - a stark reversal from the previous month’s gains of 7.5%.

Nasdaq Dorsey Wright

All but three indexes in the suite rose in August, delivering average returns of 1.3%. The best performer was Dorsey Wright Healthcare Technical Leaders (DWHC™) registering gains of 5.3%, while the worst performer was the Dorsey Wright Energy Technical Leaders™ (DWEN™) registering losses of 6.5%.

Nasdaq Dividend and Income Indexes

Average return across the suite of indexes was 1.6%, aided by a decline in Treasury yields which makes these areas more attractive. Nasdaq Emerging Markets High Equity Income™ (NQEMHEI™) registered gains of 3.3%, followed closely by Nasdaq US Broad Dividend Achievers™ (DAA™) registering gains of 3.1%. Nasdaq US SMID Cap Rising Dividend Achievers™ (NQDVSMR™) was the worst performer, registering declines of 2.1%. All other indexes registered modest gains of 1-2%.

Nasdaq Multifactor Indexes

All but two indexes in the group posted positive returns. Capital Strength™ (NQCAPST™) was the best performer, registering positive returns of 3.8%, while Nasdaq Victory US Small Cap High Dividend 100 Volatility Weighted™ (NQVWSD™) registered losses of 1.2%. On average the group was up 2.0%.

Nasdaq Sector-Specific Indexes

Average return across the suite of indexes was 1.3%. The best performing index of the group was the KBW Property & Casualty™ (KPX™), registering gains of 6.1%, while the worst performing index of the group was the KBW Financial Sector Dividend Yield™ (KDX™), registering losses of 2.5%. PHLX Gold/Silver Sector™ (XAU™), which registered impressive gains of 10.9% the previous month, eked out a modest gain of 1.0%.

Nasdaq Options and Other Quantitative Indexes

All but two indexes in the group registered positive returns in August. The best performer of the group was the Nasdaq-100 ESG BuyWrite™ (NQYLEI™), registering positive returns of 3.2%, while the worst performer of the group was the Credit Suisse Nasdaq WTI Crude Oil FLOWS106 TR™ (QUSOITR™), registering losses of 2.3% as oil prices approached their year-to-date lows on global growth concerns. On average the group was up 1.1%.

Nasdaq Crypto Indexes

The Nasdaq Crypto lineup came under pressure in August, with the Nasdaq Ethereum™ (NQETHS™) the worst performer, registering losses of 23% as Ether had its worst monthly decline in over two years, driven by ETF outflows and technical concerns; the broader Nasdaq Crypto™ (NCIS™) fell by almost 14% on the month. 
 

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Nasdaq® is a registered trademark of Nasdaq, Inc. The information contained above is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice, either on behalf of a particular security or an overall investment strategy. Neither Nasdaq, Inc. nor any of its affiliates makes any recommendation to buy or sell any security or any representation about the financial condition of any company. Statements regarding Nasdaq-listed companies or Nasdaq proprietary indexes are not guarantees of future performance. Actual results may differ materially from those expressed or implied. Past performance is not indicative of future results. Investors should undertake their own due diligence and carefully evaluate companies before investing. ADVICE FROM A SECURITIES PROFESSIONAL IS STRONGLY ADVISED.

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