Key Points

• Broader U.S. equity markets are hovering near their highs driven by fundamentals as Q3 2024 earnings are coming in solid while incoming economic data is steady. The markets are also watching Treasury 10-year yields which have risen by 60bps over the past six weeks to three-month highs.
• Performance across Nasdaq’s suite of indexes finished mostly negative for October, disproportionately driven by strong risk-off sentiment on the last day of the month. Nearly three out of every four indexes tracked in our report experienced losses, with the average index down around 1%. Crypto, precious metals, and Financials indexes were some of the notable exceptions seeing outperformance.
• Near-term focus is on the November 5^th U.S. elections. Equity volatility as measured by the VIX Index is now over 20, at the higher end of its 2024 range, and has tended to be elevated during the fourth quarters of tight Presidential election cycles. 

Chart of the Month
 

Source: Nasdaq Economic Research

https://www.nasdaq.com/articles/impact-elections-markets

Executive Summary

Following the Federal Reserve’s 50bps cut on September 18th, the markets have quickly pivoted to the micro story amidst peak Q3 2024 earnings season. As of October 31st, with more than half of the Nasdaq US 500 Large Cap™ Index’s market cap having reported, 86% of earnings and 68% of sales are at or above estimates. While 2024 and 2025 EPS estimates have been revised lower, expectations are still for 9% and 15% growth rates, respectively, and earnings growth is expected to be more broad-based in 2025—expanding beyond the communication services and technology sectors, which have driven 2024 earnings. Consequently, although valuations remain elevated across US large caps with a forward P/E at ~22x, earnings expectations remain lofty as well—thus far, justifying investors to propel equities higher throughout most of 2024. The Nasdaq suite of indexes registered an average loss of 1.1%, and the Nasdaq-100® (NDX®) retreated by 0.8% in October, despite 92% of its reported companies’ market cap beating earnings and 74% beating sales estimates. NDX is now higher by 18% YTD.

These moves in equities have come with a backdrop of Treasury 10-year yields rising by around 50bps in October to 4.28%, while 2-year yields jumped higher by over 60bps to 4.16%—both at three-month highs, as is the broader U.S. Dollar index. The rise in Treasury yields has been driven by steady U.S. economic data, which has reduced Fed rate cut expectations, as well as markets positioning for the possibility of a “Red Sweep” in the upcoming U.S. elections and the prospects of further U.S. fiscal spending regardless of which party wins. While the markets are still pricing in 50bps of cuts across the remaining two Fed meetings in 2024 (100bps of cuts total this year), expectations have been scaled back from upwards of 150bps in cuts during 2024 as of the end of late September. The markets will continue to weigh the juxtaposition of up to five 25bps Fed rate cuts currently priced in through the end of 2025 against a steady U.S. economic backdrop and, although trending lower, still somewhat elevated inflation expectations. The back half of this earnings cycle, along with the unpredictable nature of a very tight U.S. election and the read through from the upcoming Fed meeting on November 7th, will likely drive market sentiment and directionality into year’s end.

Nasdaq Indexes October 2024 Performance Recap

Among the 118 indexes tracked in this report, 32 finished in positive territory, while 86 ended the month in negative territory. The best-performing index was Nasdaq Bitcoin™ (NQBTCS™), delivering a return of 10.6%, driven by record monthly flows into Bitcoin ETFs and a generally supportive macroeconomic backdrop. The average return across all indexes was –1.1%.

Nasdaq Featured Indexes

Eight out of nine Nasdaq Featured Indexes registered negative returns in October. Within the Nasdaq Featured Indexes, the Nasdaq-100 Dorsey Wright Momentum™ (NDXDWA™) was the only index that rose, registering gains of 0.3%. The Nasdaq Next Generation 100™ (NGX™) was the worst performer, falling 2.9%. On average, the group was down 1.2%.

Nasdaq Global Indexes

All Nasdaq Global Indexes finished in negative territory and registered an average loss of 3.0% in October. The Nasdaq US Large Cap™ (NQUSL™) and the Nasdaq US Mid Cap™ (NQUSM™) were the best performers, both registering returns of just under –0.8%. The group's laggard was the Nasdaq Europe™ (NQEU™), which fell by 6.1%.

Nasdaq Thematic Tech Indexes

Performance was mixed for the Nasdaq Thematic Tech Indexes suite. The indexes registered negative returns of 0.9% on average as a group. The KBW Nasdaq Financial Technology™ (KFTX™) was the top performer, registering gains of 4.4%; another notable outperformer was the BVP Nasdaq Emerging Cloud™ (EMCLOUD™) Index, which gained 3.7%; China-based constituents produced outsized return contributions in each case. Meanwhile, the Nasdaq US Smart Semiconductor™ (NQSSSE™) and the Nasdaq CTA Global Climate Technology™ (CLMTCH™) finished the month with weak returns of –5.7% and –5.4%, respectively. The Nasdaq CTA Global Digital Health™ (BEWELL™) and the PHLX Semiconductor™ (SOX™) also finished in the red with respective losses of 4.6% and 4.4%. The semiconductor industry is witnessing diverging fortunes between companies capitalizing on the AI boom and those that are not. While TSMC expected revenue from AI server processors to more than triple this year, ASML plunged the most in 26 years on October 15th after the firm booked only half the orders analysts expected; later in the month, AMD fell by ~10% after its revenue guidance for Q4 disappointed investors.

Nasdaq Thematic Renewables and Energy Transition Materials

The suite of indexes had a weak performance in October, registering an average return of -3.3%. The Nasdaq Sprott Lithium Miners™ (NSLITP™) posted the strongest return out of all indexes in this group with a gain of 3.9%, driven by forecasts of a potential supply shortage of lithium as early as 2025. The Nasdaq Sprott Nickel Miners™ (NSNIKL™) was the laggard of the group with a loss of 9.3%.

Nasdaq Dorsey Wright

The suite delivered average returns of -1.2% in October. The worst performer of this group last month, the Dorsey Wright Energy Technical Leaders™ (DWEN™), flipped to become the best performer in October, registering gains of 2.1%. The worst performer was the Dorsey Wright International Focus Five™ (DWANQIFF™), registering losses of 5.2%. 

Nasdaq Dividend and Income Indexes

The average return across the suite of indexes was -2.1%, and all but one finished in negative territory in October. The Nasdaq Select Canadian Dividend™ (NQCADIV™) registered the strongest performance, gaining 0.1%. The Nasdaq Emerging Markets High Equity Income™ (NQEMHEI™) was the worst performer, registering a decline of 6.1%.

Nasdaq Multifactor Indexes

The average return across the suite of indexes was -0.9%, and all but one finished in negative territory this month. The best-performing index of the group was the Nasdaq AlphaDEX Large Cap Growth™ (NQDXLCG™), which registered gains of 1.5%. In comparison, the worst-performing index was The Capital Strength™ (NQCAPST™), which registered a loss of 2.0%.

Nasdaq Sector-Specific Indexes

On average, the group was up 0.3%. The KBW Nasdaq Bank™ (BKX™) was the best performer, registering a gain of 6.5% as Q3 bank earnings have been very solid, while KBW Premium Yield Equity REIT™ (KYX™) registered a loss of 5.2%.

Nasdaq Options and Other Quantitative Indexes

The average return across the suite of indexes was 1.1%. The Credit Suisse Nasdaq Silver FLOWS106 TR™ (QSLVOTR™) registered positive returns of 6.0%, marking its second consecutive month as the best performer in the group. The worst performer was the Nasdaq-100 Quarterly Protective Put 90™ (NQTRI™), registering losses of 0.9%.

Nasdaq Crypto Indexes

The average return across the Nasdaq Crypto lineup was 5.7% in October, with Nasdaq Bitcoin™ (NQBTCS™) the best performer, registering a solid gain of 10.6%. The broader Nasdaq Crypto™ (NCIS™) was not too far behind, with a gain of 7.1%. In contrast, the Nasdaq Ethereum™ (NQETHS™) registered a loss of 3.1%. Bitcoin's price eclipsed $70,000 for the first time since June as investors positioned for a possible win by former President Trump who has embraced crypto as part of his agenda. Bitcoin has also seen a tailwind leading into the elections given the expected fiscal expansion regardless of the next President, which stands to further expand the U.S. fiscal deficit. In terms of increased accessibility for investors, after granting approval to Nasdaq to list and trade options tied to spot Bitcoin ETFs, the SEC also granted approval for Bitcoin ETF options to two other exchanges in October. Bitcoin ETF flows continue to be strong with BlackRock’s IBIT seeing the strongest flows of any ETF globally during the last week of October.
 

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