Nasdaq 100 falls by 4% while Dow 30 is up by 3% till date in 2021: What should be your strategy now?
Investing abroad is fast catching up with investors in India. The US stock market has been the to-go investment avenue for most of them. The leading stock market indices in the US market include Nasdaq 100, Dow 30, and S&P 500. While Nasdaq 100 on the back of a spectacular run by the FAANG stocks had a great 2020, the returns in 2021 seem to be on the way down. In the current year till date, Nasdaq 100 is down by about 4.57 per cent while Dow 30 is up by 3.91 per cent.
According to Bloomberg, while the Dow 30 benchmark climbed to another intraday record, the Nasdaq 100 slumped to a level traditionally seen as a correction. It’s the first time since 1993 that the Dow rose and closed within 1% of a record, while the tech-heavy gauge was down more than 10% from its high.
Dow 30 index consists of the top 30 blue-chip companies but unlike some of the leading indices, Dow 30 represents companies that are only based in the US. In a way, Dow is a barometer of the US economy, its businesses and the consumption trends in the country. Dow 30 is up by nearly 33 per cent over the last 12 months.
The Nasdaq 100 index is a large-cap growth index and includes 100 of the top domestic and international non-financial companies based on market capitalization. The Index reflects companies across major industry groups, including computer hardware and software, telecommunications, retail trade and biotechnology. Nasdaq 100 is up by nearly 54 per cent over the last 12 months.
Whether the divergence will prevail over the long term remains to be seen. In the meantime, good quality stocks of established companies in the tech sector may still be accumulated at lower levels for the long term. Similarly, some good stocks from Dow 30 which are expected to shine once the US economy is back on strong footing may be looked at. Some of the prominent companies in the 30-stocks index are Boeing, Nike, Goldman Sachs, Walmart, Intel, 3M, UnitedHealth Group, Apple, Coca-Cola, McDonald’s, Microsoft etc.
The re-set in the economy is something that most global analysts have been talking about. Now is the time to build a core portfolio with quality US stocks to help you bring diversification to your Indian portfolio. If you think the Covid winner stocks have become too expensive in terms of valuations, maybe it is time to look at value stocks now.