The Nasdaq Composite index is made up of around 3,500 stocks, many of which are from the technology and consumer discretionary sectors. Growth stocks have shifted in and out of favor throughout the past few years as the economy has recovered from post-pandemic inflation. The Nasdaq tumbled into bear market territory in 2022 but then rebounded in 2023 with a 43.4% gain, one of its best performances in history. The index has benefited from economic resilience and optimism regarding artificial intelligence.
Historically, when the Nasdaq has experienced annual gains exceeding 40%, it has continued to gain upward momentum in the following years. The median 12-month period return after a large annual gain is about 15.5%, indicating the potential for the Nasdaq to move higher in 2024. Additionally, the Federal Reserve has hinted that its rate-hiking campaign may be over, which could lead to considerable growth in corporate revenues and profits, as well as robust economic expansion.
Investors need to exercise patience when investing in the stock market, especially when considering timing the market. The Nasdaq fell 56% during the bear market that accompanied the Great Recession, but it has gained 424% since then. Investors who are looking to profit from the Nasdaq’s performance should also consider companies that are well-positioned to benefit from artificial intelligence, such as Microsoft, Datadog, Amazon, Alphabet, Nvidia, and Broadcom.
Furthermore, investors should carefully research individual companies before investing, taking into account growth prospects and valuation. They can choose to invest in a Nasdaq Composite index fund like the Fidelity Nasdaq Composite ETF or an S&P 500 index fund like the Vanguard S&P 500 ETF. Patience is key to successfully making money in the stock market, and no matter what investment strategy is chosen, it’s important to stay focused on the long-term.