The Nasdaq-100 Index Continues to See New Highs
Nasdaq Global Indices
With the Nasdaq-100 (or NDX) continuing to reach all-time highs, and now that we’re halfway through the year, it’s a good time to analyze some historic returns on both a quarterly and monthly basis. The chart below shows performance history for the Nasdaq-100 (Total Return) from January 31, 1985, to July 31, 2017. The NDX reached a new all-time high in late July and as of the end of the July 31, 2017, it’s up an impressive 16.7%. The Nasdaq-100 has posted impressive quarterly gains of 12% (Q1) and 4% (Q2) thus far in 2017. The last negative quarter it had was Q2 2016 of -1%. On a cumulative basis, the NDX has notched a gain of 5211%, which amounts to a 25% annualized return with 26% annualized volatility.
The chart below depicts the quarterly win streak from Q2-1985 to Q2-2017. We can see the the most recent quarterly win streak spanning four quarters from Q3-2016 to Q2-2017. The longest win streak was ten quarters, from Q1-2013 to Q2-2015. During the longest win streak noted above, the largest gain was 12% in Q4-2014, while the smallest gain was 0.4% in Q1-2014.
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The Nasdaq-100 index has had a stellar year, rising 20.0% year-to-date as of August 25, 2017. In the process, it has been creating new all-time highs. It now stands at 5,834, slightly shy of the all-time high of 5,950 in late July.
The technology sector has been the best-performing sector over the years and has been the darling of the markets. Sustained growth in the sector has drawn investors, who now expect more from it. That has driven valuations higher. The tech sector is now trading at a 28.4x trailing 12-month earnings, while the S&P 500 index is trading close to a 22.0x trailing 12-month earnings.
The graph above compares the price returns of the Nasdaq-100 index with the broader S&P 500 Index (SPY) (IVV). Clearly, the former has outperformed the broader market consistently over the long term. Since December 1985, the Nasdaq-100 index has risen 4,321.8% compared to the S&P 500 at 1,057.6%.
However, as the graph suggests, most of these gains have come in the last ten years, after the financial crisis. This run has been backed by the boom of biotech stocks (IBB), coupled with stellar earnings growth in the tech sector (XLK).