The Betashares Nasdaq 100 ETF (ASX: NDQ) has plateaued in recent weeks, down 4.8% from its 31 August all-time high of $34.17.
What's weighing on NDQ ASX?
US 10-year Treasury yields surge to 4-month highs
Investors have become fixated on yields, a major driver for how tech shares are valued.
Benchmark US 10-year Treasury yields have surged in recent weeks, rallying from 1.3% in late September to 1.62% last Friday.
Bond yields have climbed higher on the back of higher and more persistent levels of inflation and the expectation that the US Federal Reserve will begin increasing interest rates in 2022.
The Fed initially described elevated levels of inflation as 'transitory', as the economy cycles through higher prices from the COVID-19 induced year of 2020.
However, the recent jump in oil prices, rising transport costs and the impact of supply shortfalls is seeing a more persistent rise in near-term inflation.
This has weighed on the performance of NDQ constituents as higher interest rates make the future cash flows of fast growing tech shares less appealing in the present.
Market almost-certain on a rate hike next year
According to Reuters, futures on the federal funds rate, which track short-term interest rate expectations, has priced in a quarter-point hike by the Fed in either November or December next year.
"The fed funds market showed a more than 94% chance of a rate hike by November 2022, fully pricing that scenario in December next year," the report said.
The recent volatility of NDQ reflects factors such as a rotation back towards more cyclical sectors and a re-rate for tech shares to reflect rising interest rates.
Supply chain woes
The global shortage of semiconductor chips has delayed the production of products ranging from cars and mobile phones to kitchen appliances.
Semiconductor shortages and supply-chain bottlenecks could weigh on the near-term revenues for NDQ constituents such as Microsoft, Amazon, Tesla and Nvidia.
