Presentation of Nasdaq and its characteristics:
Although published and quoted in the United States, Nasdaq is not a national stock exchange index. Its initials represent ‘National Association of Securities Dealers Automated Quotations’ and it represents the new technologies sector on an international level.
The Nasdaq was created by the NASD, the National Association of Securities Dealers (currently known as the FINRA), in 1971 to respond to the major advances in the electronics sector that demanded a dedicated market separate from the global economical markets. Nowadays Nasdaq is the major digital electronic stock market in the world.
It is actually on Wall Street that Nasdaq is quoted. This index is in fact the second most important on this major stock exchange with impressively high trading volumes.
The volatility seen on the Nasdaq is among the highest in the market, making it an asset often used for day-trading or short-term trading.
The NASDAQ market in detail:
In this article you have found useful information about the Nasdaq stock market index, but what about the market of the same name?
The NASDAQ market is a financial centre and stock exchange that began in 1971. Today, this market is the second largest equity market in the United States in terms of trading volumes and is thus second only to the New York Stock Exchange. NASDAQ is also the largest electronic equity market in the world. It has been held by the group of the same name since 2008. Of course, the NASDAQ index is the benchmark stock market index for this market and therefore tends to measure the performance of companies whose shares are listed on it.
Today, the total market capitalization of this market is more than $1 trillion and it lists the shares of more than 3,200 different companies, the vast majority of which suffered significant losses during the collapse of the speculative bubbles. Exchanges are processed continuously and on different servers grouped in a single room. The systems housed there are thus able to process more than 900 transactions per second.
It is also important to note here that companies listed on the NASDAQ market very often come from the IT and Internet sector. However, there are also stocks from other sectors such as banking, distribution, biotechnology, industry and transportation. This index is therefore much more representative today than in the past.
Finally, it should be noted that the NASDAQ market also plays the role of a natural outlet for venture capital funds, which is a financing method whose principle is to accept the risk of losing money in nearly three quarters of cases by compensating with the remaining quarter, which is most often a company capable of rapidly increasing its size.
Historical evolution of the Nasdaq :
- 1985: On 31 January 1985, the Nasdaq 100 stock index was established by NASDAQ.
- 1998: This was the year in which the first foreign companies were admitted to the index for the first time. At that time, the conditions for inclusion in the Nasdaq index were very strict and were relaxed in 2002, which was quite recently.
- 2000: In 2000, the Nasdaq 100 reached its first all-time high of more than 4,700 points, driven by the wave of technology stocks and the Internet bubble. That same year, a vote was held among NASDAQ members to restructure the brand as a publicly owned, for-profit shareholder company. The NASDAQ Stock Market Inc. was born.
- 2007: NASDAQ acquires OMX, a Swedish-Finnish company that operates in the same way as a financial institution. NASDAQ thus changes its name to NASDAQ OMX Group. It then also acquires the Boston Stock Exchange.
- 2008: Nasdaq then acquires the Philadelphia Stock Exchange, which is the oldest of the American stock exchanges. In the same year, the NYSE Euronext will buy the AMEX, which will be listed on the New York Stock Exchange.
- 2009: The first mobile web version of the sector is created on the nasdaq.com website.
- 2016 : At the end of 2016, 461 different companies have historically been listed in the Nasdaq 100 Index, but only four companies have been in the index since its inception - Apple, Costco, Intel and PACCAR.
- 2020 : The Nasdaq 100 is one of the most resilient stock market indices to the Covid pandemic. Its share price will only fall from 9,623 to 6,994 points between February and March before rising again.
- 2021: In 2021, 57% of the NASDAQ 100 is made up of technology stocks. Consumer services is the second largest industry sector at 21.99%, public health at 7.08%, consumer goods companies at 6.14% and industrials at 5.92%.
- 2022: In January 2022, the Nasdaq broke a new all-time high of over 16,200 points. It then experienced a technical correction and a further decline caused by the conflict in Ukraine until it reached 13,070 points in April.
What are the factors that could change the Nasdaq rate?
As is the case for the rates of other major stock market indices around the world such as the CAC 40, the FTSE 100, or the DAX 30, the Nasdaq rate can change, either with a rise or a fall, depending on the interest shown by the market traders in a particular asset. In fact, the Nasdaq 100 rate will rise when the volume of transactions rises, and the rate will fall when the stock market transaction activity decreases. In this article we will explain the factors that can influence the rate of this stock market index that you should therefore monitor closely.
Of course, we know that the Nasdaq index rate can be influenced by certain stock market events relating to the companies that are quoted on this index such as the creation of new products or services, the nomination of new managers or directors as well as the publication of annual or quarterly financial results.
The Nasdaq rate can also be influenced by certain specific economic factors in the United States. For example, the monetary policy or the interest rates could have a strong impact on this asset as well as other economic indicators that reflect the performance of the country or indirectly the household spending or investment levels of companies. Generally speaking we know that this stock market index and the market it is linked to is directly influenced by economic figures published by this country such as those related to growth, inflation and employment over one month, six months or a year which are particularly monitored.
It is clear that the same is true with the political data as we have observed recently with the strong reaction of the markets to the tweets and declarations of Donald Trump. This American President became an indicator of the market feeling which strongly influenced the stock market rates and was therefore followed by a number of investors. We can also confirm that the geopolitical tension can exert a strong influence on the Nasdaq 100 stock market index as was the case recently with the trade war between China and the United States. This tension can in fact, depending on the circumstances, cause a rise or fall in the rate of this asset.
Of course, an economic or financial crisis will also have a direct influence, often negatively, on the rate of this asset. This was notably the case in 2008 with the infamous sub-prime crisis which led to a drop in the Nasdaq 100 index rate, and the same is true for the Covid-19 pandemic although the technological assets have in fact suffered less from the latter than other assets.
As with other indices of this type, the economic cycles are part of the factors that can influence this rate. In fact, the cycles of recession, expansion, recovery and over reaching tend to repeat themselves and are often followed and used by investors on the Nasdaq 100. It should be noted here that these cycles depend greatly on the particular activity sector.
Finally, another factor that could exert a strong influence on the Nasdaq 100 index rate is the market feeling. Here the data you should analyse relates more to psychology and it is best if you are experienced in stock market trading and investment to understand how the traders will behave in different situations.
How to invest and trade on the Nasdaq?
The Nasdaq is one of the major US stock market indices, made up of technology, biotech and internet services companies. Investing and trading on the Nasdaq offers investors an opportunity to invest in some of the world's most innovative and dynamic companies. In this text, we will explore the different ways to invest and trade on Nasdaq.
- Investing in Exchange Traded Funds (ETFs): Exchange-traded funds (ETFs) are investments that allow investors to buy a portion of a portfolio of shares in listed companies. ETFs are often used to invest in the Nasdaq, as they provide diversified exposure to a large number of technology and internet services companies listed in the index. ETFs are also considered a long-term investment, as investors can hold their units for years without needing to sell them.
- Investing in mutual funds: Mutual funds are another popular way to invest in the Nasdaq. Mutual funds are portfolios of publicly traded companies managed by investment professionals. Mutual funds offer investors the opportunity to invest in a range of technology and Internet services companies with a single transaction. Investors can also buy or sell mutual fund shares at any time.
- Investing in individual stocks: Investors can also invest in individual stocks of companies listed on the Nasdaq. Individual stocks offer investors a higher potential return than ETFs and mutual funds, but they also carry a higher risk. Investors should do their own research on companies before investing and closely monitor price movements.
- Options trading: Options trading is a method of trading on Nasdaq that allows traders to buy or sell call or put options on an underlying asset at a pre-determined price. Traders can buy calls or puts based on their expectations of where the index will go. Options trading is also high risk.
- CFD trading: CFD (contracts for difference) trading on the Nasdaq is a trading method that allows investors to invest in the performance of the index without physically owning the individual shares. CFDs are financial instruments that allow traders to speculate on the rise or fall of the price of an underlying asset, in this case the Nasdaq.