When Performance Matters: Nasdaq-100 vs. S&P 500, Third Quarter '22

 

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The Nasdaq-100® and S&P 500 are two of the most popular equity indexes in the United States. 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 September 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 under-performance of 1.20% in 2021. (On a price-return basis, 2021 was a near-tie, with the Nasdaq-100 underperforming by only 0.26%).

Historical Performance

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 2.43% higher between December 31, 2009 and September 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 September 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.

Conclusion

The Nasdaq-100 finished the third quarter of 2022 with a YTD loss of 32.35% compared to the S&P 500 loss of 23.26%, during a period of heightened volatility and widespread equity market weakness. While notable, this underperformance of 910 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 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.

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Disclaimer: 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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Nasdaq Index Research Team

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Nasdaq calculates more than 40,000 diverse indexes, providing coverage across asset classes, countries and sectors.

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