With equities swinging rapidly, investors are looking for the stock market index with the best performance. That’s where the Nasdaq 100 vs. S&P 500 competition comes into play.
The Main Difference:
To begin, consider the key differences between the Nasdaq 100 and the S&P 500. The Nasdaq 100 is in charge of tracking the performance of the 100 largest and most actively traded American corporations on the Nasdaq stock exchange. However, there is a catch- financial equities are not eligible for inclusion in this index. If you’ve been keeping up with market news, you’ll know that the Nasdaq 100 is known as a tech-heavy index. Alphabet, Amazon, Netflix, Apple, Facebook, PepsiCo, and PayPal are just a few of the major companies represented in the Nasdaq 100.
S&P 500 indicator is frequently cited in newspapers and on news bulletins during stories attempting to measure the performance of the US stock market. Although many of the top constituents are similar to the Nasdaq 100 – Microsoft, Apple, Amazon, Facebook, and Alphabet are its top five holdings – healthcare behemoths such as Johnson & Johnson, financial behemoths such as Berkshire Hathaway and Visa, and consumer staples behemoth Procter & Gamble also appear in the top ten.
The Nasdaq is smaller and focuses on a few stock market sectors, whereas the S&P 500 attempts to monitor the overall market. As a rule of thumb, the S&P 500 accounts for roughly 80% of all activity in US equities.
Difference based on Performance:
Before the Covid-19 pandemic became prevalent in February 2020, the S&P 500 was trading at a record high of 3,338 points, with other indices such as the Dow Jones. As the entire scope of the coronavirus crisis became evident, it lost roughly a third of its value, falling as low as 2,237 points. However, the S&P 500 has since surged to new highs. The index passed the 4,000 mark in late March 2021, before soaring to 4,535 points.
The Nasdaq 100’s storey begins similarly – trading at record highs, followed by a collapse of nearly a third in late March 2020. The Nasdaq recovered from the epidemic far faster than the S&P 100. In mid-June 2020, the index surpassed 10,000 points for the first time – levels not witnessed prior to the coronavirus. This index was able to recoup its losses in three months and gain something more on top of that. Since then, it has risen steadily, reaching 15,000 points in early July 2021. It progressively grew to 15,675 in August 2021, with the index currently standing at 15,355 at the time of writing on 25 October 2021.
The Nasdaq 100’s stunning comeback last year was primarily due to the fact that the globe got even more reliant on technology. Indeed, with millions of us using Zoom for the first time in lockdown and relying on Facebook to stay in touch with friends and family, it’s little surprise that stocks in this index performed spectacularly.
Difference based on Future Performace:
When interest rates do rise, the S&P 500 may have an advantage because to its composition of finance firms such as Allstate Corporation, American Express, and Aon. When interest rates rise, financial institutions typically generate big profits because they can charge higher interest rates for lending money.
Having said that, technology firms have outperformed other industries and sectors during the last decade. If companies like Apple and Google continue to innovate and develop new technology and products, the Nasdaq 100’s performance may improve.
When determining whether to invest in the S&P 500 or the Nasdaq 100, always conduct your own study and consider all current trends and developments.