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Nasdaq 100 Index – Commentary - August 2023

Nasdaq 100 Index – Commentary

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Equities took a breather in August from the year-to-date rally as major indexes declined for the month. Utilities and Consumer Staples led the overall market down while Energy was the only sector with positive performance.

One of the catalysts for the selloff arrived on the second day of trading in August with the announcement of the most recent change in the ADP National Employment Report for the United States. This report shows the change in the number of employees on non-farm business payrolls. While the expectation was 192k jobs added, the actual number was reported at 324k. While this was positive for the US employment picture, investors interpreted this as a sign the economy was not cooling at a pace to prevent the Federal Open Market Committee (FOMC) from increasing the target Fed Funds Rate. This caused equities to fall and interest rates to rise. A few days later, the new US unemployment rate was reported and came in at 3.5%, below the 3.6% expectation. This was another data point where “good news was bad news” and added to the fear of another rate hike in the future.

At the annual Jackson Hold Economic Symposium, Jerome Powell reinforced the messaging he has delivered at previous FOMC meetings: the economy continues to grow as measured by GDP, inflation remains too high and must get down to 2% and employment needs to cool. Growth data, combined with a still high inflation number, led Powel to conclude that further interest rate hikes may be needed.

The Consumer Price Index (CPI) reading for July was also announced and showed inflation increasing at a rate of 3.2% on a year-over-year basis. This was lower than the 3.3% expectation from analysts. The month-over-month was in line with the 0.2% estimate, or an annualized rate of 2.4%. The components that contributed to the increase in the month-over-month number was a rise to the cost of services, followed by food and then energy. Year-over-year Core CPI, which excludes the costs of food and energy, also met expectations, and was reported at 4.7%. While the 3.2% reading was in line with what analysts were anticipating, it did raise concerns that the downward trend of inflation we have seen may be stalling.

Index performance

Past performance does not predict future returns.

  1M YTD 1Y 10Y(ann.)

NASDAQ-100

-1.5% 42.3% 27.1% 18.4%
S&P 500 -1.6% 18.3% 15.3% 12.2%

Relative

0.1% 20.2% 10.2% 5.6%

Source: Bloomberg as of 31 Aug 2023.
An investment cannot be made directly into an index. 

Monthly performance Nasdaq-100 vs. S&P 500
Monthly performance Nasdaq-100 vs. S&P 500

Source: Bloomberg as of 31 Aug 2023.
An investment cannot be made directly into an index.

Sector weightings Nasdaq-100 vs. S&P 500
Sector weightings Nasdaq-100 vs. S&P 500

Data: Invesco, FactSet as of 31 Aug 2023. Data in USD.

Nasdaq 100 Performance Drivers 

August performance attribution of the Nasdaq 100 vs the S&P 500 Index.

For the month of August, the Nasdaq 100 Index (NDX) returned -1.5%, outperforming the S&P 500 Index, which returned -1.6%. From a sector perspective, Telecommunications, Health Care and Consumer Discretionary were the best performing sectors in NDX and returned 4.95%, -0.60% and -0.93%, respectively. During the month, these three sectors had average weights of 5.37%, 7.11% and 18.79%, respectively. The bottom performing sectors in NDX were Consumer Staples, Industrials and Utilities with average weights of 4.40%, 4.88% and 1.24%, respectively. Consumer Staples returned -4.24%, Industrials returned -3.47% while Utilities returned -3.16%.

NDX’s outperformance vs. the S&P 500 was largely driven by its overweight exposure in the Telecommunications sector. The index’s lack of exposure to Financials also contributed to relative performance. NDX’s differentiated holdings in the Consumer Discretionary sector was the third largest contributor to relative performance vs. the S&P 500. The Technology sector detracted the most from relative performance and was driven by its differentiated holdings. Industrials and Energy also detracted from relative performance, both driven by underweight exposure and differentiated holdings, when compared to the S&P 500.

August Attribution Nasdaq 100 vs the S&P 500
August Attribution Nasdaq 100 vs the S&P 500

Data: Invesco, FactSet, as of 31 Aug 2023 Data in USD. Sectors: ICB Classification. All figures in percentage terms

August’s Top Contributors/Detractors relative to the S&P 500
August’s Top Contributors/Detractors relative to the S&P 500

Source: Bloomberg, as of 31 Aug 2023. Past performance does not predict future returns. Top and bottom performers for the month by relative performance. Holdings are subject to change and are not buy/sell recommendations.

Historical Performance
Historical Performance

Past performance does not predict future returns

Data: Invesco, Bloomberg, as of 31 August 2023. Data in USD. An investment cannot be made into an index.

Investment Risks

The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

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