That was the last year the annual gain on the Standard & Poor’s 500 index bested the return on the Nasdaq Composite index—and it’s on track to do so again in 2021.
So far this year the S&P 500 has risen 27.4%, topping the Nasdaq’s 22.5% gain. If the divergence between the two indexes continues for three more days, it will be the first time in five years that the S&P 500 has performed better than the Nasdaq on an annual basis.
When the pandemic struck in 2020, the Nasdaq—about half technology shares—benefited from stratospheric jumps to record highs in “stay-at-home” stocks like Zoom, Peloton, and other technology shares. But this year some of those stocks have come back to earth, weighing on the index. Meanwhile, the S&P 500, less exposed to technology, has enjoyed a rebound in energy stocks, which had been hit hard by the pandemic last year when oil demand fell off sharply as people traveled less and sheltered in place.
Investors should not count on a continuation of the atypical conditions that fueled the market’s biggest gainers over the past 18 months, wrote Michael O’Rourke, chief market strategist at JonesTrading, in a commentary. That era’s big winners “should be faded,” he wrote. “Even the mighty Amazon is a massive underperformer this year and many names have fared far worse.”
The S&P 500 on Tuesday closed 4.84 points, or 0.1%, lower at 4,786.35, while the Nasdaq fell 89.54 points, or 0.56%, to 15,781.72.
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