The Nasdaq saw its rise restrained by a correction in the value of companies which had posted huge stock market increases in 2020. This is particularly the case of Zoom (videoconference), which saw its capitalization drop by 45% this year .
Small event on the stock markets across the Atlantic. The Nasdaq is on track to record slower growth than the S&P 500 for the first time since 2016. On Monday evening, the flagship Wall Street technology index was indeed up 23% across the whole of the year 2021, while the S&P 500, which brings together the 500 largest US market caps, gained 28% over the period, says CNBC. Barring an unlikely turnaround, positions will remain frozen until the end of the week, which is usually one of the quietest of the year.
However, the Nasdaq started the year on the hats of wheels, in the wake of an exceptional year 2020, driven by a slew of technology companies offering services that have enabled hundreds of millions of people to work and have fun at home during the various confinements. However, the euphoria did not last for the Wall Street Technology Index. Indeed, stock market exchanges began to slow down with the arrival of the first vaccines against Covid-19, suggesting an exit from the pandemic, with a reduction in remote work, the use of meal delivery applications and platforms for home entertainment.
Inflation and vaccines have changed the game in 2021
In addition, inflation was invited to the party, exceeding 4% in April, then 6.8% in November. In this context, the Federal Reserve (Fed), which considers that inflation should not exceed 2% to remain healthy, ended up reacting to stop this inflationary spiral. While the US Central Bank expected fleeting price increases, it established new economic projections, forecasting inflation of 2.6% next year. In this less favorable economic climate, investors began to worry about demand for certain activities, which led them to favor sectors that tend to hold up better in an environment of rising rates.
In the S&P 500, the category that recorded the best performance this year is energy, amid soaring gas prices, followed by real estate. The high-tech sector is not far behind, however, with good resistance made possible by the mega-caps of giants like Apple ($ 2,950 billion) and Microsoft ($ 2,570 billion).
The Nasdaq impacted by the correction affecting the big winners of the crisis
However, the Nasdaq was the victim of the fall in the value of companies that captured huge market capitalizations in 2020. This is notably the case of Zoom (videoconference), which saw its capitalization drop by 45% this year, after a spectacular 326% jump in its income last year, almost quintupling its stock price in the midst of the Covid-19 pandemic. Another tumble, that of Peloton (exercise bike), which slipped 76% on Wall Street after a dizzying increase of 430% in 2020. The year 2021 was also difficult for Twilio, Spotify and Block (ex-Square ) who have lost more than 20% since January. PayPal has meanwhile a drop of 18%.
This year marks a pause in the overwhelming domination of the Nasdaq over the S&P 500. In 2020, the Nasdaq had climbed 44%, while the S&P 500 had only increased by 16% over the year. Since the end of 2016, the Nasdaq has been untouchable, increasing its value in total by 139% over the period, against 68% for the S&P 500. It should also be noted that the first seven capitalizations of the S&P 500 (Apple, Microsoft, Alphabet, Amazon, Tesla, Meta and Nvidia), which now make up around 27% of the index, are also the largest members of the Nasdaq, which is why the growth of both indices this year is only a few percentage points apart.