Nasdaq at record high! Here’s what it means for the ASX 200

The Nasdaq Index has just hit a new all-time high. Here’s what that might mean for S&P/ASX 200 Index (ASX:XJO) shares.

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ASX shares higher

Early this morning (our time), the US Nasdaq Composite (INDEXNASDAQ: .IXIC) Index hit a new all-time high after a 0.14% bump. The new high watermark of 14,044.95 points was reached soon after the US markets opened.

This latest rise means that the Nasdaq is now (get ready for some mind-blowing numbers) up 10.3% in 2021 so far, 45.48% over the past 12 months, 223% over the past 5 years, and up 103% since 23 March last year.

Such staggering returns from an index are rather unusual – for comparison, the S&P/ASX 200 Index (ASX: XJO) is still 2.2% down from where it was 12 months ago.

So how did this happen?

Well, the Nasdaq is a rather unusual index in that it only holds some US shares. The Nasdaq is actually one of the 2 major stock exchanges in the US, the other being the New York Stock Exchange (NYSE).

Since the Nasdaq is a newer institution and more accommodating in certain ways, newer companies tend to prefer listing on the Nasdaq over the NYSE. That means that the Nasdaq Index is dominated by tech companies.

Let’s take the ASX-listed exchange-traded fund (ETF) that tracks the NASDAQ-100 (INDEXNASDAQ: NDX) – the BetaShares Nasdaq 100 ETF (ASX: NDQ). At the time of writing, BetaShares lists the following companies as its 10 largest holdings:

Stock NDQ Weighting 12-Month Performance
Apple Inc (NASDAQ: AAPL) 11.8% 69.19%
Microsoft Corporation (NASDAQ: MSFT) 9.4% 29.18%
Amazon.com Inc (NASDAQ: AMZN) 8.5% 54.88%
Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL) 6.7% 38.72% (GOOG)
Tesla Inc (NASDAQ: TSLA) 5.1% 450.67%
Facebook Inc (NASDAQ: FB) 3.3% 26.47%
NVIDIA Corporation (NASDAQ: NVDA) 2.7% 116.96%
Paypal Holdings Inc (NASDAQ: PYPL) 2.6% 136.71%
Netflix Inc (NASDAQ: NFLX) 1.9% 50.66%
Adobe Inc (NASDAQ: ADBE) 1.9% 34.07%

As you can see, all of the major stocks in this index have enjoyed phenomenal gains over the past 12 months, despite the coronavirus-induced market crash last year.

Apple in particular has had a huge impact on the performance of the overall index, thanks to its heavy weighting. Tesla didn’t hurt either.

What does this mean for ASX 200 shares?

Well, as we’ve discussed before, the ASX’s performance is heavily correlated to the performance of the US markets. We tend to rise and fall more or less in tandem.

Even so, (as we noted earlier), the ASX has been trailing the performance of the US markets over the past 12 months. Even though the ASX 200’s recovery from the lows of the coronavirus crash would have been vastly assisted by the rising US markets, the Nasdaq, in particular, has still left the ASX in the dust.

But since the Reserve Bank of Australia (RBA) indicated last week that its ultra-easy monetary policy probably looks set to continue until 2024, the ASX 200 might start playing catchup with the US markets.

The ASX 200 does lack the kind of heavy-hitting tech stocks that have pushed the Nasdaq up so high. Even so, it’s possible that insatiable hunger for dividends and yield from ASX shares, in conjunction with a booming US stock market, may help push the ASX above its 2020 high watermark and beyond.

That’s just a possible scenario. But the fact remains that higher US markets tend to mean higher ASX shares, so stay tuned to this one!

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Sebastian Bowen owns shares of Alphabet (A shares), Facebook, and Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Adobe Systems, Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, Microsoft, Netflix, NVIDIA, PayPal Holdings, and Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS and recommends the following options: long January 2022 $1920 calls on Amazon, short January 2022 $1940 calls on Amazon, and long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia has recommended Adobe Systems, Alphabet (A shares), Alphabet (C shares), Amazon, Apple, BETANASDAQ ETF UNITS, Facebook, Netflix, NVIDIA, and PayPal Holdings. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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