Nasdaq 100 on track for worst month since 2008
12-month quantitative forecasts
Our machine learning model predicts the Nasdaq 100 will have a volatile move down to 11950 by June, a 17% decline from current levels, coinciding with its forecasted 3-year moving average price. Strong support is expected at this level, enough to propel the price 3.8% above its current position at 15,000 by the end of the forecast period (January 2023).
The Nasdaq 100 is currently trading at a 20% premium to its 3-year moving average, an area that has provided crucial support for sharp corrections in the past – notably the Covid crash in early 2020 but also in 2019, 2016 and 2010. .
A decline towards the projected 3-year average at around 12,500 – a 25% correction from the highs – is an attractive area for longer-term investors to accumulate as they look to “buy the dip”. However, history suggests that any serious violation of this level could usher in a longer bear market, as was proven in 2000 and 2008, so be careful.
Resilience of technology stocks and general outperformance
It’s no surprise that tech stocks have fared better than the wider market during Covid, as their goods and services are perfectly positioned to benefit from: 1) the shift to remote working; 2) the accelerated pace of digitization; and 3) the increase in time spent inside our homes consuming digital content on all kinds of devices.
Despite this month’s massive sell-off, the Nasdaq 100 index, which is heavily weighted in favor of big tech companies, has returned 58% since January 2020, while the much broader S&P 500 index has failed. reported “only” 33%. Small-cap stocks (those between $300 million and $2 billion in market capitalization) underperformed, as seen by the Russell Small Cap Index which rose just 21% over the same period .
Tech stocks have been Wall Street darlings for over a decade, while small-cap stocks have remained unloved – this is clearly evidenced by their performance metrics.
The future of technology
Generally, it hasn’t been wise to bet against long-term tech stocks. The pace of advancement in technology and its ability to complement breakthroughs in other areas creates perpetual synergistic growth for the entire industry.
In fact, let’s try to weave a single thread through a collection of Nasdaq 100 companies to demonstrate their symbiosis:
Advances in computer chip manufacturing (Intel, Qualcomm, AMD) continue to improve the capabilities of smartphones (Apple, T-Mobile) but also pave the way for more powerful graphics processing units (Nvidia) that enable models deeper machine learning (Google) to design better recommender systems (Netflix, Amazon, Facebook) that conceptually provide the increased intelligence needed for self-driving cars (Telsa) as well as a plethora of modern games (Activision Blizzard, Electronic Arts) and immersive virtual reality systems (Meta). These same GPU-based machine learning models also enable the rapid training of Covid vaccines and other therapeutics (Moderna) – so much so that Moderna launched an AI Academy for all employees.
This symbiotic relationship should continue to drive the industry forward.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.