The highflying Nasdaq 100 stocks have become the "safe" ones

On the Nasdaq's march to new highs, a curious thing has happened - they've become the "safe" stocks.

As the Wall Street Journal noted, starting during the pandemic, many stocks that would be considered highflying flipped their usual patterns. As indexes like the S&P 500 rose and fell, these stocks rose or fell less than the S&P or even moved in the opposite direction.

Over the past 20 sessions, its beta has plunged to 0.74 relative to the S&P 500, its lowest in more than 100 days.

Nasdaq 100 NDX beta to S&P 500

This has been a modest negative for the Nasdaq 100 going forward, with below-average returns and a poor risk/reward ratio, especially up to three months later.

Over the next 1-3 months, the ratio consistently dropped as the S&P outperformed the NDX. There have been other signs in recent weeks that incessant outperformance of these stocks might start to falter, and this is another (minor) one.

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We also looked at:

  • A more in-depth look at what happens in the Nasdaq 100 and S&P 500 when its beta falls even as it hits new highs
  • The Cumulative Advance/Decline Line has hit a new high, but the S&P and the stocks-only A/D Line are lagging
  • The Nasdaq's new high / new low ratio is the highest it's been in years
  • The gold / silver ratio has plunged like it has only 4 other times in history

The post titled The highflying Nasdaq 100 stocks have become the "safe" ones was originally published as on on 2020-07-23.

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