Nasdaq 100 forecast: The US100 rebounds ahead of Fed meeting in December
The Nasdaq 100 Index (US100) has moved up off its 52-week low seen in October as traders anticipate a slowdown in the pace of the US Federal Reserve’s (Fed) interest rate hikes and the US dollar (USD) has weakened, improving sentiment on stocks.
The index remains down by around 30% since the start of the year as monetary policy and geopolitical tensions have weighed on the financial markets and as technology companies have shown signs of economic slowdown with large-scale layoffs.
Nasdaq 100 Index live chart
What is a realistic Nasdaq 100 forecast as the Fed potentially adjusts its monetary policy approach? In this article, we look at the latest Nasdaq 100 news, drivers for the index’s value and forecasts for how it might perform for the rest of the year and beyond.
What is the Nasdaq 100?
The Nasdaq 100, also known as the NDX and US100 Index, is a composite index of 100 of the largest non-financial companies listed on the Nasdaq Stock Market, based on their market capitalisation.
As of 9 December, the index’s biggest 10 components were:
Alphabet Class A
Alphabet Class C
The US100 is synonymous with technology stocks, which account for 55.4% of its component companies. It also contains stocks in the consumer discretionary, healthcare, consumer staples, industrials and telecommunications sectors.
You can trade the Nasdaq 100 using mutual or exchange-traded funds (ETFs) as well as futures, options, annuities and contracts for difference (CFDs). The value of exchange-traded products (ETPs) tracking the index exceeded $300bn at the end of 2021.
What is your sentiment on US100?
What drives the Nasdaq 100 Index?
The index’s value changes as the share prices of its component stocks fluctuate in response to global economic growth, digitalisation, technological innovation, financial performance and investor sentiment.
As the NDX is weighted, a sharp movement in the share price of one of the larger components can result in a large move in the index’s value.
The growth in the value of the Nasdaq spiked in 2020 as technology and consumer stocks benefited from the acceleration in the transition to ecommerce during Covid-19 lockdowns. In October 2020, a survey by consulting firm McKinsey found that the crisis accelerated digitalisation by several years.
Over the past five years, the Nasdaq 100 has gained 79.97%, compared with a 48.12% gain in the S&P 500 Index (US500).
Nasdaq falls to lowest level since 2020
The NDX peaked at 16,764.86 points in November 2021 and has since been in a downward trend.
It started 2022 at 16,501.77, and dropped to the 14,000 mark by the end of January. Its value fell further to 13,500 by late February as bearish sentiment gained traction with the Russian invasion of Ukraine.
The index was down at 13,046 by mid-March. A late March rally to 15,239 could not be sustained as the Fed tapered off its asset-buying programme that had provided support to the markets during the pandemic and began raising interest rates.
The Fed raised its target federal funds rate by 25 basis points (bps) on 17 March to 0.25-0.50%, and by another 50 bps on 5 May to 0.75-1%.
The NDX plunged to 11,257.57 on 16 June, its lowest level since October 2020, as the Fed raised the rate by 75 bps to 1.5%-1.75%. Two more 75-bp hikes followed on 28 July and 22 September, bringing the target range to 3%-3.25%.
The Nasdaq 100 trend turned higher over the summer as economic data had investors anticipating that the Fed would begin to slow the pace of hikes.
The index reached 13,667.18 on 15 August. However, high inflation data released in August tempered hopes that the Fed would slow down the pace of hikes, and the market turned lower again.
The index reached a 52-week low of 10,440.64 in October, after the third consecutive 75 point hike on 22 September.
The US dollar has weakened since October. The annual inflation rate retreated to 7.7%, accelerating its retreat from the June high of 9.1%, after coming in at 8.5% in July, 8.3% in August and 8.2% in September. This has fuelled market expectations that the Fed could soften its approach to interest rates, following a fourth 75 point hike on 3 November.
The index has rebounded above the 11,000 level, rising from 10,797.55 ahead of the inflation announcement to 11.637.50 at the close on 8 December.
What does that mean for the Nasdaq outlook for the near term and into 2023?
Let’s look at some of the latest Nasdaq 100 predictions.
Nasdaq 100 forecast: Will the index fall to fresh lows or rebound?
Stock market analysts are cautious on the outlook given the indications from the Federal Reserve that interest rates will continue to rise.
“Ultimately, the degree of inflation moderation ahead, in turn Fed policy, and how much damage will be inflicted on the economy (to bring inflation under control) will remain the primary influences on earnings and multiples in our view,” according to analysis by US investment bank Raymond James.
“We do believe that we are in the late stages of this bear market, due to our belief that inflation is set to moderate over the next year and that the recession will be mild. However, the Fed remains in tightening mode, tightening acts with a lag on the economy, and it will likely take time for the Fed and investors to have high conviction on the inflationary and economic outlook- resulting in more time needed before equities are able to show sustainable upside in our view.
“The bank’s analysts “maintain our overall stance to refrain from chasing the rally periods and to build exposure in the weak periods,” and note that “Technology earnings estimates are getting revised downward at a quicker pace than the S&P 500, which is a headwind for sector performance.”
The Nasdaq 100 forecast for 2023 from algorithm-based forecasting service Wallet Investor at the time of writing (9 December) indicated that the index had bottomed out and could rise from 12,015.64 points at the start of the year to 13,649.05 by the end of the year.
The service’s Nasdaq 100 forecast for 2025 estimated that the index could climb to 17,012.37, up from 15,341.90 at the end of 2024. Wallet Investor’s five-year projection showed the index at 20,011.15, indicating a bullish Nasdaq 100 forecast for 2030 at new all-time highs.
However, the long-term Nasdaq 100 forecast from The Economy Forecast Agency was bearish, predicting that the index could drop to 9,301 points at the end of 2023 from 10,981 at the end of 2022 and 11766 in March 2023. The index could then move up to 10,998 by the end of 2024, the data showed.
A US100 forecast from Trading Economics estimated that the index could fall from 11,605.65 at the end of 2022 to 10,513.73 in one year, based on global macro model projections and analysts’ expectations.
When evaluating any Nasdaq 100 forecast to inform your trading, it’s important to keep in mind that unexpected geopolitical events and government announcements can drive market volatility, making it difficult for analysts and algorithm-based forecasters to come up with accurate long-term predictions.
If you’re interested in investing in the Nasdaq 100, look at the latest market trends, news, technical and fundamental US tech 100 analysis, and expert opinion before making any investment decision. Keep in mind that past performance is no guarantee of future returns. And never invest money you cannot afford to lose.
Is the Nasdaq 100 a good investment?
Over the long term, the Nasdaq 100 Index has gained value and outperformed the S&P 500, but investors should be aware that past performance is no guarantee of future returns.
Whether the index is a good investment for you depends on your personal financial goals, portfolio composition and risk tolerance, among other factors. Always make sure to do your own research. And never invest money you cannot afford to lose.
Will the Nasdaq 100 go up or down?
The direction of the NDX could depend on the performance of its constituent company stocks, based on their financial performance, macroeconomic factors and monetary policy in the US and major markets, among other factors.
What is the best time to trade the Nasdaq 100?
The busiest time for the US100 Index is around the release of key US economic announcements such as trade data, inflation and interest rates, as well as major world events that can affect investor sentiment and drive price volatility. Remember that high volatility can increase the risk of losses. You should make trading decisions after performing your own research.
Should I invest in the Nasdaq 100?
Whether you invest in the Nasdaq 100 Index or any other asset is a personal decision you should take depending on your risk tolerance and investing strategy. You should do your own research to develop an informed view of the market. Always make sure to do your own research. And never invest money you cannot afford to lose.