How different is Nasdaq 100 from S&P 500 in terms of sector exposure and performance – Find out

Since January this year, the difference in returns between Nasdaq 100 and S&P 500 in terms of the downside is startling yet pales in front of the upside in returns generated by Nasdaq earlier. As of August 11, 200, the Nasdaq 100 and S&P 500 were down by 18.55 percent and 11.73 percent respectively. Since July, the two indices have recovered a lot of ground.

The Nasdaq 100 index had a YTD loss of 29.22% compared to the S&P 500 loss of 19.96%, as of June 30, 2022. While notable, this underperformance of 926 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 first six months of 2022 were a complete meltdown for the stocks with the market in the grip of bears. July was relatively a better month when stock prices recovered. Over the last 1-month, Nasdaq 100 seems to have taken a lead over S&P 500 with returns of 12% and 8% respectively.

In a recent study conducted by the Nasdaq Index Research Team, it was seen that the Nasdaq-100 had outperformed the S&P 500 by a wide margin between December 31, 2007 and June 30, 2022. It was also seen that the Nasdaq-100 TR Index has outperformed 11 out of the 14 full calendar years, with a minimal underperformance of 1.20% in 2021. Also, 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.

Nasdaq 100 and S&P 500, the two popular equity indexes for investors globally are distinctly different from each other. While the Nasdaq 100 is a tech-dominated index with not a single company from the financial and banking space, the S&P 500 remains the top-most single indicator of large-cap US stocks representing companies across 11 sectors including Information Technology, Health Care and Communication Services totaling about 50 per cent of the index.

Some of the top US global companies part of the Nasdaq 100 are Microsoft, Apple, Amazon, Alphabet (Google), Meta (Facebook), Intel, Cisco Systems, Comcast, Pepsico, Tesla, Nvidia, Adobe and Paypal. When it comes to the formidable list of stocks in S&P 500, in addition to some of the top blue technology stocks as listed on Nasdaq, Johnson & Johnson, Berkshire Hathaway, Visa Inc, JP Morgan Chase are a part of the index.

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.

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 will continue into the future.

For a long-term investor, it is better to remain diversified and be allocated to both Nasdaq 100 and S&P 500 indices either through individual stocks or ETFs.

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