Insight

Nasdaq-100: A gauge of the modern economy

Invesco
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Key takeaways
1

The Nasdaq-100, which is tracked by Invesco EQQQ Nasdaq-100 UCITS ETF (EQQQ), provides exposure to a wide variety of industries, including many leading technology companies.

2

The Nasdaq-100 Index has outperformed the S&P 500 in recent years partly due to the strength of tech companies innovating in their sectors.

3

Artificial intelligence (AI) and other technological advances may provide a tailwind to companies committed to research and development and disrupting their industries.

The Nasdaq-100 and S&P 500 are two of the most popular US equity indices. Exchange-traded funds (ETFs) designed to follow these two benchmarks are often used to anchor core portfolios. In EMEA, passive ETFs tracking the Nasdaq-100 have about $35 billion in assets compared with $228 billion for those tracking the S&P 500. But could that gap narrow in coming years?

It’s difficult to predict but a case could be made that the Nasdaq-100 could be the index of the future, as its constituents have a demonstrated ability to be nimble and adaptive to shifting trends in the market. Whether it’s Amazon starting as an online book retailer and expanding into web services through AWS, or Apple starting as a computer maker and becoming one of the largest cell phone manufacturers in the world, many Nasdaq-100 companies have shown the ability to diversify as consumer needs have evolved.

  • Investment risks

    For complete information on risks, refer to the legal documents. Please see below for more information. Value Fluctuation, Equity, Concentration, Securities Lending.

The benchmark to beat 

Is nearly 15 years of outperformance a fluke or a meaningful trend?

Let’s check the numbers. Since 1 January 2008, the Nasdaq-100 Index has delivered a cumulative total return of 906%, more than double the 376% return of the S&P 500 Index. That works out to an annualized return of 15.33% for the Nasdaq-100 compared with 10.13% for the S&P 500. 

Cumulative Total Return Performance: Nasdaq-100 versus the S&P 500

Source: Nasdaq Indexes, period shown is from December 31, 2007 to June 30, 2023.

Past performance does not predict future returns. Source: Nasdaq indices, period shown is from 31 December 2007 to 29 February 2024, in USD.  An investor cannot invest directly in an index. Index returns do not represent Fund returns. Please see below for standardised rolling 12-month performance for the past 5 years for the S&P 500 and Nasdaq-100 indices. 1 An investment in this fund is an acquisition of units in a passively managed, index tracking fund rather than in the underlying assets owned by the fund. 

Homing in on disruption and innovation

Why has the Nasdaq-100 historically outperformed over the past 15 years? There have been several factors at work, but one important reason has been the strong performance of innovative technology stocks over the past decade, particularly the tech leaders. For example, the technology sector in the S&P 500 has delivered a 21.73% annualized total return over the last 10 years, compared with 12.69% for the broader S&P 500. That leadership makes sense given the rapid pace of technological adoption in recent years. The Nasdaq-100 index has about 51% exposure to the tech sector versus roughly 30% for the S&P 5001.

Although the Nasdaq-100’s overweight exposure to the outperforming tech sector, when compared to the S&P 500, has been a tailwind for the past 10 years, it’s important to remember that the benchmark is much more than just a technology index. The Nasdaq-100 includes companies from other sectors such as consumer products and healthcare that are transforming their respective industries to help drive growth. After all, the technology sector doesn’t have a monopoly on innovation.

Some of the most innovative companies in the world, particularly in Silicon Valley, have opted to list their stock on the Nasdaq, a trend that doesn’t seem destined to end anytime soon. The Nasdaq-100 index is associated with innovation and many cutting-edge companies. As a result, it’s not surprising that many firms want to align their brands with the innovative stamp of Nasdaq, which introduced the world’s first electronic trading platform in 1971.

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Why consider investing in innovation?

Our EQQQ Nasdaq-100 UCITS ETF, launched in 2002, offers diversification across sectors within the US large-cap space. Access the 100 largest non-financial companies listed on the Nasdaq Stock Exchange with our ETF.

 

We also offer a range of Nasdaq UCITS ETFs offering exposure to growing companies with strong fundamentals. Our range offers access to disruptive technologies, revolutionary giants, and household names from a range of different sectors, helping provide investors with unique diversification benefits within the US large- and mid-cap equity space. 

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Footnotes

  • All data: Bloomberg, as at 29 February 2024

    1.       Sector exposure uses GICS (Global Industry Classification Standard) to classify securities. Invesco, as of 29 February 2024. 

     
 

Feb '23-Feb '24

Feb '22-
Feb '23

Feb '21-Feb '22

 Feb '21-Feb '22 Feb '19 -
Feb '20

YTD (last EoM)

S&P 500 Net Total Return Index

29.82%

-8.16%

15.90%

15.90%

7.56%

7.03%

NASDAQ-100 Notional Net Total Return Index

50.70%

-14.89%

10.83%

10.83%

20.08%

7.35%

Investment risks

  • Value Fluctuation: The value of investments, and any income from them, will fluctuate. This may partly be the result of changes in exchange rates. Investors may not get back the full amount invested.

    Equity: The value of equities and equity-related securities can be affected by a number of factors including the activities and results of the issuer and general and regional economic and market conditions. This may result in fluctuations in the value of the Fund.

    Concentration: The Fund might be concentrated in a specific region or sector or be exposed to a limited number of positions, which might result in greater fluctuations in the value of the Fund than for a fund that is more diversified.

    Securities lending: The Fund may be exposed to the risk of the borrower defaulting on its obligation to return the securities at the end of the loan period and of being unable to sell the collateral provided to it if the borrower defaults. 

Important information

  • Data as at 31 March 2024, unless otherwise stated. By accepting this material, you consent to communicate with us in English, unless you inform us otherwise. This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security, or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.

    Views and opinions are based on current market conditions and are subject to change. For information on our funds and the relevant risks, refer to the Key Information Documents/Key Investor Information Documents (local languages) and Prospectus (English, French, German), and the financial reports, available from www.invesco.eu. A summary of investor rights is available in English from www.invescomanagementcompany.ie. The management company may terminate marketing arrangements. UCITS ETF’s units / shares purchased on the secondary market cannot usually be sold directly back to UCITS ETF. Investors must buy and sell units / shares on a secondary market with the assistance of an intermediary (e.g. a stockbroker) and may incur fees for doing so. In addition, investors may pay more than the current net asset value when buying units / shares and may receive less than the current net asset value when selling them. For the full objectives and investment policy please consult the current prospectus.

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