Key Highlights:
- The US Share markets are expected to see high vitality in this year too.
- NASDAQ 100 index has fallen more than 15% since November.
- Analysts suggest investing in a diversified portfolio.
US share markets are expected to see high vitality in 2022 as well. The impending monetary tightening comment by the US Federal Reserve has brought a punitive reality check on the growth stock investors.
The growth stock investors have realized that there is no right price for high-growth stocks, especially when the companies are not growing. Steve Sosnick, the Chief Strategist of Interactive Brokers, has backed the comment. Considering the current volatile situation of the US Share Markets, and surrounding uncertainty around high growth stocks, Steve has advised the investors to de-risk their portfolio in favor of generating profits.
NASDAQ take a greater hit
Since the US Federal Reserve commented on the concerns regarding inflation and the possibility of a rise in interest rates has affected the NASDAQ. NASDAQ 100 index has fallen by 15% since mid-November. The S&P 500 has also been affected and fallen by 8% in the same timeframe.
So far in 2022, NASDAQ has fallen 15.10%, S&P 500 has affected by 7%, while the Dow Jones Industrial Average has lost 4.5% on a year-to-date basis.
The Fed meeting commenced on 26th January did leave the key interest rates near zero. However, Fed also warned that there might be a raising in the Fed Funds target rate to tackle the persistent inflation due to the COVID-challenged supply chain.
Invest in a diversified portfolio
The inflation has equally affected the NASDAQ and S&P 500 performances. Both are heavyweight stocks however, Steve Sosnick suggests investing in S&P 500 as a better option due to its business and geographical diversification. He explained, “S&P 500 is a broader index with a cross-section of industries; it is globally diversified too. Investing in SPX helps to build a broader portfolio.”
If we look at the data, S&P 500 index has more than triples investors’ money in the last decade- rising 220%, to 4,349, from 1,361 levels. (as of 21st Feb). The tech-heavy NASDAQ 100 has outperformed S&P 500 in both 2-year as well as 10-year timeframe. Although, it remains uncertain if NASDAQ will continue its dominance.
