Nasdaq 100 total returns slump for the first time in 13 years

Over the last seven trading days, the US tech sector dropped 3.1%, mostly driven by the loss in big names such as Microsoft (NASDAQ: MSFT), which lost 9.4% over the same period.

Meanwhile, the Nasdaq 100 index, representing the technology sector, dropped 34.15% year-to-date (YTD).

Founder and CEO of Compound Capital Advisors, Charlie Bilello, tracked the index’s returns and took to Twitter on October 11, to share the numbers, which were 23% annualized over the past 13 years.

“The Nasdaq 100 was up 13 years in a row entering this year, generating an annualized return of over 23% during those years. But you can’t buy past returns, and investors who piled in last year are learning the same lesson that was learned back in 2000…”

Nasdaq 100 Total Returns
2000: -37%
2001: -33%
2002: -38%
2003: +50%
2004: +11%
2005: +2%
2006: +7%
2007: +19%
2008: -42%
2009: +55%
2010: +20%
2011: +4%
2012: +18%
2013: +37%
2014: +19%
2015: +10%
2016: +7%
2017: +33%
2018: +.04%
2019: +39%
2020: +49%
2021: +27%
2022 YTD: -34%
— Charlie Bilello (@charliebilello) October 11, 2022

It seems that the markets are being driven by the posturing of the Federal Reserve (Fed), whose stance towards inflation indicates high borrowing costs. These high costs will hurt the real economy by clipping corporate earnings and making money scarce in the markets.

In the meantime, David Bahnsen, chief investment officer at The Bahnsen Group, spoke about the worries plaguing the markets in the form of the oncoming recession, which is being priced in at the moment.

“This is an awful stock market environment that is grappling with a weakening economy, uncertainty over earnings and how long the Fed’s tightening will last, and sentiment issues with an extremely risk-averse investor psychology.”

He also added:

“While we believe a recession is inevitable, it’s impossible to factor this into an actionable stock market view because we don’t know how much recession risk is already priced into markets. There is a significant chance that by the time we are in a recession, markets will already be pricing in the recovery, as markets are forward-looking.”

No relief rally is expected any time soon; however, one could come if the new inflation numbers come lower than expected and if the Fed decides to make a smaller rate hike. At the moment, both of these scenarios don’t look likely.

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Source: https://finbold.com/nasdaq-100-total-returns-slump-for-the-first-time-in-13-years/