The NASDAQ, another very popular term when it comes to investing, is something that is sometimes misunderstood. Much like the S&P 500, the NASDAQ is not an actual thing a person can invest in, it is an index as well, and this index offers the chance to invest in a slice of the market.
The S&P 500, and the NASDAQ for that matter, is often associated with the general health of the economy in the USA, and the global economy on a grader scale of things too. This is a good way to understand the NASDAQ, but it is a little more complicated in comparison with the S&P 500 which is some of the top 500 companies.
But, the NASDAQ is multi-faceted and there are two different things that the term can refer to. First, it is the National Association of Securities Dealers Automated Quotations (NASDAQ) exchange, the first electronic exchange that allowed investors to buy and sell stock on a computerized, speedy, and transparent system, without the need for a physical trading floor.
Then there is the index. This is what people are looking at when they are deciding to invest, this is the index that can either go up — or down. But, when you are investing in the NASDAQ index, you are essentially investing in the companies that trade on the exchange, and most of these companies are technology and internet-related, but there are financial, consumer, biotech, and industrial companies as well. The Nasdaq Composite tracks more than 3,300 stocks.
In comparison to something like the S&P 500 which does not consider different sectors and rather focuses on the size and worth of a company, the NASDAQ is tied to what trades on the exchange and because of its digital bias, it is often a palace for traders interested in technology to track and trace, as well as invest.
NASDAQ Forecast: for 2020 and beyond
The NASDAQ is not immune to the current state of the markets and it too felt the pinch of the Covid-19 induced market panic which caused the global markets to collapse in the middle of March. Having a look at the NASDAQ 100, the index that tracks the 100 biggest non-financial companies listed on the Nasdaq stock market such as Microsoft, Alphabet, Facebook, and Intel, the index did better than the other popular ones.
In comparison with the Dow Jones, and the S&P 500, the NASDAQ had the least impact dealt to it from the market collapse due to the coronavirus, and it has also risen back better than the other two — but it was also a lot higher before the market fell in comparison to its other assets.
Part of the reason for this is because the performance of the NASDAQ 100 Index depends mostly on the performance of the companies it makes up. And, the movements of some companies tend to have more impact on it than others. For example, companies like Microsoft, Apple, and Amazon have a weighting of over 10 percent each while 70 other companies have a weighting of less than 1 percent.
This has helped the NASDAQ in 2020 as there has been good news for some of these major companies in this time of market uncertainty such as increased sales on Amazon and Microsoft’s conferencing software Zoom also taking off.
But, as the Covid-19 pandemic starts to slow it is starting to determine how the rest of 2020 will go for the index because much of the performance will be based on how quickly the US economy can open. But, being a majority digital index means this index is a good one to watch at this time of social distancing.
NASDAQ Historical Overview
The NASDAQ has had a great history as it is an index based on technological breakthroughs after it was the first to offer electronic trading, but this happened as far back as 1971.
When the NASDAQ began it had a brief climb to begin with, hitting 816 points before crashing down to less than 300 points in 1974. But, literally since that low the NASDAQ trended upwards all the way to the year 2000, and that trend got very strong during the dot com times, but it also suffered from the dot com bust.
At its 2000 peak it reached over 7,000 points but fell to 1,660 two years later before recovering, and then falling again to a similar level in 2009. But, the climb started again and the NASDAQ hit a high of 9,000 at the end of last year
Today, the NASDAQ lists more than 3,500 companies and boasts the highest trade volume in the U.S. market. More than $10 trillion worth of companies trade on the NASDAQ.
Current NASDAQ Index
Currently, the NASDAQ index is climbing once again, and has almost retraced its losses from the market fall in mid March. It was sitting at 9,800 points before the drop affected the entire global market, which took it to 6,800 but the index is not back in the 9,000 range.
This is of course highly promising for the traditional index, but it does explain that the losses, and gains, are due to the Covid-19 induced market panic, but because of the make up of mostly digital companies, some which have thrived during this pandemic, the market has become a good one to invest in and has attracted scared traders back.
The daily chart shows that the NASDAQ 100 Index moved above the 50-day and 100-day exponential moving averages back in the middle of April. Volatility, as measured by the Average True Range (ATR) has also been falling. It has also moved above the 61.8 percent Fibonacci Retracement level. Therefore, in the short term, the index may attempt to retest the 71.8 percent retracement level at 9,140.
Top factors that impact NASDAQ in 2020 & in the Future
Because the NASDAQ is an index, and carves out a slice of the market and how a range of companies are doing in the economy, it is unsurprising that the movement of the NASDAQ is quite well aligned with how the economy is doing, and the general health of the markets.
Therefore, major geopolitical events can have a massive impact on the NASDAQ, just as it does in the S&P 500 and others. When there are positive moves, especially for the US, and major companies can cash in on that good news, the index will usually rise. But when there are negative impacts, the same can happen in a downward trend.
For example, the US vs China trade war that was heightened during the end of 2019 showed how the US was flexing its muscle and showing its power of china, the second-largest economy in the world – and this especially helped the NASDAQ because of its affiliation with tech companies as the talk was the US would have a boom in technology should the trade war be realized.
Another big factor is the Federal Reserve and its different policies. The Federal Reserve’s ongoing policy of near-zero interest rates that has made equities more attractive than bonds. This is still on going during the Covid-19 pandemic, and while it is for different easons, it does add to the allure of things like NASDAQ
Additionally, the maturation of technology companies is certainly helping as well as the rise of Apple Inc, a company that didn’t appear among the largest 20 companies by market value in the index 15 years ago and now represents more than 10 percent of its weight. Many of the world’s biggest tech companies are found in the NASDAQ and they are wrestling the momentum from other major companies in terms of performance.
NASDAQ forecast for 2020
The entirety of 2020 will no doubt be primarily based around how the markets work with the global pandemic which is starting to ease and allowing for the economy to try and right itself. This is an important next few months for the rest of the year because while the virus may mostly be under control there is little knowledge of how the economy will come back on track.
The longer the overall shutdown lasts, the more of a negative impact the markets will see — but with some states already opening, and major businesses getting back to work, there has been a profound positive impact already. The rest of 2020 is likely going to be about getting the economy going and people back to work which will help the market.
Another thing to consider however is the make up of the S&P 500 as some of the players involved in this index may not be recovering as quickly as others. For example, airlines and travel related business is expected to see a major downturn through 2020 and that can impact the market and this index.
The invention of a drug or vaccine to treat the virus could have a positive impact on the index. It was recently reported that a drug by Gilead Sciences (GILD) was showing strong signs that it could cure the disease. If this cure is found soon, the index will continue rising.
Looking at some of the technical indicators, the general feeling is this is now a market to buy in as the economy starts to right itself. More so, moving averages are also pointing strongly to buy, but the oscillators actually leaning towards sell.
That being said, there are more oscillators on neutral than sell — only Momentum (10) and MACD(12, 26) are signalling a sell.
Future NASDAQ Predictions
As explained previously, the predictions on the NASDAQ into the future are correlated somewhat to the economy and the general markt, but where the NASDAQ differs is with its more digital approach and digital makeup.
The NASDAQ has a basis for technology and because of the impending fourth industrial revolution which will be predicated on technology this index is an important one, and a popular one. The future predictions on this market will be determined on how well the technology wave comes in.
What is interesting to note is that while the pandemic plays its part in stunting the market, it may well boost the need for better technology, and this could impact the growth of the NASDAQ in the future.
NASDAQ Predictions for next 5 years (until 2025)
The next five years are certainly going to be about recovery and getting back to where the market was before as it was in a good place and on a decent climb. However, this looming recession, and possible depression, has ties to the last great depression and if this history is to be followed, it does not look positive.
Robert J. Shiller looked back towards the Great Depression of 1929 for his analysis. By 1932, stock values across the board had diminished by 75 per cent. Overall, it took seven years for the market capitalization to recover – and even then, it wasn’t sustainable. Investors had to wait until 1949 – that’s 20 years later – before the market cap was consistently above 1929 levels.
Shiller’s hope is that the pandemic doesn’t reach these drastic proportions. This should not be the case, especially not for the NASDAQ, as things are quite different for this metric in terms of the company makeup. Traditional industries struggled to write themselves after the depression, but technology movies a lot faster and the next five years have more chance of seeing a big rebound in the NASDAQ than a continued slump.
In fact, while the NASDAQ currently sits at around 8,800 points, it is estimated and predicted to rise over 10,000 as early as April 2021, and stay above that level towards the beginning of 2022. This means the recovery should be well set in, but the following two years or so should be about the growth of technology and could ramp up the growth substantially into 2025.
NASDAQ 10 years forecast (until 2030)
Predicting long term – as in the next 10 years – is difficult and highly speculative. A lot of the conclusions from experts have the reaction from the markets to Covid-19 at the forefront of their considerations as this will determine the platform that they either rise from, or fall.
Torsten Slok, chief economist, managing director; and additional analysts, Deutsche Bank Securities, says:
“Markets want more clarity and if the cases are beginning to slow down and can stabilize and then the market can see more upside and clarity. Given that clarity is not there yet, we are still worried about downside risk to the stock market. We still do think there could be more downside risk.”
Paul Christopher, CFA, head of global market strategy, and Brian Rehling, CFA, head of global fixed income strategy, Wells Fargo Securities, explains how a recession is looming.
“The Federal Reserve recently announced multiple policy support for financial markets. Simultaneously, the U.S. administration and congressional leaders have accelerated legislative proposals to help support the economy and the coronavirus’ victims.
However, “neither fiscal or monetary policy steps – even aggressive steps – are likely to stop an economic recession, which we expect in the middle two quarters of this year.”
These immediate lows however mean that the 10 year forecast for the NASDAQ is actually extremely bullish as there is only room to grow for this index, and to grow rather substantially as this pandemic is left behind in the past and the future technology welcomed.
Summary: What is the future of NASDAQ
The NASDAQ index is one of firsts. It was the first digital market palcem and it has become one of the leading indexes for the future of trading. This means it has ties to technological advances and will be a major maret mover as technology grows.
It also is an index that has not been immune to the Pandemic and the economic hit seen there as it has reacted in correlation to the economic fall and the threat of a recession. However, the future of this index is only good as it has a bottom to grow from and a reason to grow with its technological bias.
In order to take advantage of the lows that the market is currently going through and the expected return to new highs after the pandemic, it is a good time to find a platform that offers you the chance to trade the NASDAQ index — such as PrimeXBT: you can sign up here.
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