Nasdaq Hidden Underperformance Reveals 2022 Stock Market Possibilities – Forbes
Nasdaq sign reflected in winter snow melt (Photo by Stephen Chernin/Getty Images)
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The Nasdaq Composite recent underperformance looks different. Even though the Nasdaq exchange carries the largest popular stocks, the Nasdaq index has lagged the S&P 500 by more than 3% over the past month (Nov. 17 to Dec. 17).
More concerning is the Nasdaq 100
NDAQ
(biggest stocks) Index. It also trails the S&P 500. Moreover, apply a little math and a hidden underperformance story emerges:
One month’s performance (Nov. 17 to Dec. 17)
- S&P 500: (1.45)%
- Nasdaq 100: (3.11)%
- Nasdaq Composite: (4.72)%
Now, because the Nasdaq 100 market capitalization weighting is 75% of the Nasdaq Composite total, we can solve for the performance of the remaining 25%:
- Equation: Nasdaq performance = (75% x Nasdaq 100 performance) + (25% of Nasdaq Non-100 performance)
- So, filling in what we know gives us: -4.72% = (.75 x -3.11%) + (.25 x __)
- Transposing gives us the answer: [-4.72% – (.75 x 3.11%)] / .25 = -9.57%
Here’s the monthly graph showing how we got to this place…
One-month performance, showing Nasdaq breakdown
John Tobey
Okay, raise your hand if you knew the 3000+ Nasdaq stocks not in the Nasdaq 100 fell 10% in one month. (My hand is not in the air.) So, now what? What’s going on? And what does it mean looking ahead to 2022?
The first step: Dig into the Nasdaq non-100 details
My first thought was that year-end tax selling of losing stocks was going gangbusters. However, looking at the month’s performance compared to the year-to-date performance and the declines from 52-week highs showed no correlation. So, scratch that notion.
Next, I looked for pockets of mass underperformance that could reveal fundamental or technical reasons for the large underperformance. However, I found none, but that non-finding did help the search.
Next was an examination of the 3000+ Nasdaq non-100 stocks broken down by sectors. Notice the similarly large performance numbers in the table below. That means whatever the cause, it applies to the entirety of the list. For some reason, the Nasdaq exchange stocks beyond the Nasdaq 100 have become of lesser interest to investors.
The sector breakdown for the Nasdaq non-100 issues
John Tobey (Financial Visualizations – FinViz.com)
The second step: Dig into the Nasdaq 100 underperformance
My thought was that if there was simply a split between the 100 top Nasdaq names and all the rest, the Nasdaq 100 shouldn’t be dragging behind the …….