How the Nasdaq-100 Index Has Outperformed the Broader Markets
Nasdaq Global Indexes
We see similar tendencies in analyzing historic second quarter statistics, with the average second quarter gain for the Nasdaq-100 (10%) outpacing that of the S&P 500 (6%). Historically, the largest second quarter gain for the Nasdaq-100 was in 20%, while the largest second quarter gain for the S&P 500 was 17%.
The largest monthly gain for the Nasdaq-100 was 25% (November 1999), while the S&P 500’s largest monthly gain was just 11. In terms of monthly win streaks, the latest one was seven months, which came between November 2016 and May 2017. During this timeframe, the largest gain was seen in January 2017 at 5.25%, followed by February 2017 at 4.37%.
Interested in AMZN? Don't miss the next report.
Receive e-mail alerts for new research on AMZN
Despite the Nasdaq-100’s second quarter 2017 return of 4%, the index was actually down -2.4% in the month of June. Since the end of the second quarter, the index had a strong recovery for the month of July and was up 4.2% .
The Nasdaq-100 Total Return Index has shown impressive performance since inception. Thus far into 2017 (as of July 31, 2017), it has outperformed the S&P 500 Total Return Index by just over 10%. From January 31, 1985, to the present, the Nasdaq-100 has displayed impressive gains in terms of quarterly and monthly performances. While the index had a down month in June 2017, it rebounded nicely and posted a 4.2% gain in July. The index is currently in the midst of a quarterly win streak that extends back four quarters to Q3-2016.
The graph above shows the composition of the Nasdaq-100 index. Technology stocks make up 58.0% of the index, while the consumer discretionary and healthcare sectors make up 22.0% and 10.0%, respectively. Of the discretionary components, almost half is made up of Netflix (NFLX), Amazon (AMZN), Tesla Motors (TSLA), and Priceline, which may also be characterized as tech stocks. As mentioned before, tech is obviously a large part of the Index, but stocks in the other sectors like healthcare and consumer discretionary have been driving performance as well.
Apple (AAPL), Microsoft (MSFT), Amazon, Facebook (FB), and the Google parent Alphabet (GOOG) currently make up 40.0% of the Nasdaq-100. Clearly thought, their success has driven them to such a large weighting. Apple alone makes up 11.6% of the index. The index’s returns in 2017 have been driven by these stocks, most of which have returned well over 20.0% this year.
As the first graph shows, while the Nasdaq-100 could be more volatile than the broader markets, it gives much better returns in the long term.