NASDAQ Is The Best Performing U.S. Index

Before the COVID-19 induced market collapse, most major U.S. indices were making all-time highs (see Figure 1). Dow Jones Transportation Average (DJT) and S&P 500 Small Caps were two indices that reached the respective highs they made in October 2018. The February-March saw all indices sharply reach multi-year lows. The two laggards declined the most and the NASDAQ Composite the least.

Since early 2019, NASDAQ Composite has been the best major U.S. index (see Figure 2). It continues to perform better than others in the bounce too. S&P 500 is performing better than Dow Jones Industrial Average (DJIA), DJT, and small-caps. NASDAQ is performing better than S&P and DJIA.

Figure 1: U.S. Indices (Weekly)

Figure 2: U.S. Indices Relative Strength

The U.S. Is Doing Better Than Rest

The S&P 500 is outperforming the emerging markets and the developed markets.

The MSCI EAFE Index ($MSEAFE) has been underperforming S&P 500 consistently for many years (second pane Figure 3). The S&P 500 is also doing better than MSCI EMF Index ($MSEMF) (first pane Figure 3) now though their returns were similar during the last few months of 2019.

Developed markets are doing better than emerging markets in the current bounce (third pane Figure 3).

Figure 4 shows the relative performance of some of the emerging market and developed market ETFs, and $SPY is the best performing ETF. It is performing better than $EEM, the ETF for emerging market (first pane Figure 4), $ACWX, the ex-US ETF (second pane Figure 4), and $EFA, the ETF for the developed markets (third pane Figure 4).

The last pane of Figure 4 is the ratio of $EEM and $EFA. The emerging markets outperformed the developed market from November 2019 to late February 2020. Since then, the developed markets have been doing better.

Figure 3: U.S. Developed and Emerging Market Relative Strength

Figure 4: Emerging and Developed World ETF

Defensive Sectors Are Outperforming

In a market crash, the defensive sectors are expected to perform better, so it is not surprising that this is the case this time. The Select Sector SPDR ETFs for Consumer Staples ($XLP), Technology ($XLK), Healthcare ($XLV), Utilities ($XLU), and Telecom ($XTL) sectors ETFs are outperforming the S&P 500 (see Figure 5). Most of the other sectors – Energy ($XLE), Material ($XLB), Industrials ($XLI), Real Estate ($XLRE), Consumer Discretionary ($XLY), and Financials ($XLF) – are underperforming $SPY (see Figure 6).

Figure 5: Consumer Staples, Technology, Technology, Utilities, and Telecom

Figure 6: Energy, Materials, Industrials, Real Estate, Consumer Discretionary, and Finance

In Short

• The major U.S. indices are doing better than developed market and emerging market indices
• Developed markets are doing better than emerging markets
• Within the U.S., NASDAQ Composite is leading, followed by S&P 500 and Dow Jones Industrial Average
• Within S&P 500, the defensive sectors are performing better than others.