With the November election growing closer, it’s inevitable that many eyes are focusing on the economy. And not just on the economy, but also on the indicators of its general health such as the NASDAQ and the Dow indices. In a year that has been a little atypical, to say the least, the former has had more than a few surprises in store with a common question being what exactly has been behind these unexpected market movements.
NASDAQ bucks economic trends for the year
As anyone who has followed the NASDAQ will know, this has been a year in which records have continued to be broken, despite the turbulence that has affected others and created genuine bear markets. But in June, when some of the economic data being released was at its very worst, the NASDAQ Composite found itself trading at over 10,000 points for the first time ever. It subsequently slipped back to 9,953.75 but this was still a small, yet significant, rise of 0.3% on the day. Since then, anyone who wants to trade and who has been keeping a close eye on the NASDAQ index numbers will have seen it continue to go from strength to strength. In fact, nearing the end of August it had reached well over 11,000 points with no signs that this bull run could be coming to an end.
The tech boom takes off
One of the reasons that some analysts have given for this remarkable success has been the focus on tech companies that NASDAQ has. With many of the world’s biggest corporations within the 3,000 companies included in the index, a number of these have been having a very good 2020. For example, the streaming giant Netflix is reported to have put on around 16 million new subscribers in the first quarter of 2020. Then there is Apple who celebrated becoming the country’s first-ever publicly-traded company with a market capitalization of over $2 trillion.
Looking at the DOW
The Dow Jones, by cotnrast, has seen a far more volatile 2020 to date. Perhaps the most extreme instance came in late March when it saw a 915-point loss in the space of a day. By focusing on just 30 companies chosen, not for their market capitalization, but selected by the Wall Street Journal for their supposed high earning potential and economic importance, this is a clear difference from the NASDAQ.
It also means that when economic choppy waters that may affect the industrial sector seem to be on the horizon, the Dow may well take the brunt of it. Especially when companies that feature on this particular index include names like Boeing, Exxon and Chevron, all of which operate in sectors that are finding themselves under greater economic pressures than ever before. That said, the Dow has managed to bounce back from the dark days of March when down as low as 21,600 points to reach almost 28,000 by the end of August.
What lies ahead?
So, with a still fairly uncertain economic future ahead of us, how the markets react remains to be seen. From the evidence gained thus far, at least, it would seem that the tech-based investment opportunities of the NASDAQ may be a marginally better bet than the Dow’s industrials. But only time will tell.