NASDAQ’s Stellar December: Will Small Caps Lead Performance in 2024?

FXOpen

As the New York trading session begins today after a brief hiatus for the weekend and the festive holiday period, traders return to their desks with a mix of anticipation and caution. The last few days of trading in 2023 are underway, with all eyes on the NASDAQ stocks, known for their dynamic performance.

As many companies remain closed for the week, trading volumes are expected to be slightly lower than usual during a standard working week. Investors and traders have taken a break to celebrate the holidays and are now poised to prepare for the challenges and opportunities that the new year may bring.

Looking back over the course of December, the NASDAQ 100 Index has been climbing consistently and steadily, appreciating from 15,919 on December 6, to 16,849 on December 19 at FXOpen. Since then, the NASDAQ 100 has hovered just below the 16,850 mark and today rests at 16,848 at FXOpen in anticipation of the opening of the US market today.

Indicative pricing only

Over the past 30 days, the NASDAQ has risen by around 800 points overall, and the scene is set for a positive outlook from many analysts when looking at the initial part of the new year.

The NASDAQ exchange is renowned for its position as a preferred venue for tech companies to list their stocks, and tracking the performance of these has been very interesting since the beginning of this decade. During 2021, there were many new entrants that surprised the investing community by suddenly appearing as listed companies with high valuations, having used the SPAC (Special Purchase Acquisition Company) method of bypassing the usual criteria required for listing on public exchanges. Alongside this was an overall low valuation for tech stocks, which lingered for several months.

2022 was a year of revival of interest in big cap tech stocks, and 2023 continued that dynamic further, the buoyancy of the NASDAQ having been largely bolstered by the 'Magnificent 7' Silicon Valley giants Microsoft, Amazon, Meta (formerly Facebook), Apple, Google parent Alphabet, Nvidia, and Tesla.

Looking ahead to the beginning of 2024, there is still a large degree of focus on these big cap giants, which lead the NASDAQ's trading volume by being some of the world's most traded stocks, and there is some discussion about the advancements in AI (Artificial Intelligence) by these companies being a potential driving force in investibility.

However, there are also schools of thought that consider companies with smaller capitalisations to be potentially good performers next year. Morgan Stanley has stated that it may be worth considering that smaller cap stocks could grow this coming year and have the potential to appear compelling over a longer investment horizon.

The Federal Reserve's monetary policy may be worth following when taking this prediction into consideration, largely because high interest rates have hampered smaller companies for a long time now, as they find it harder to cope with inflated monthly commitments than larger corporations.

If the interest rate rises are no longer implemented next year, and there is a decrease, smaller cap firms may be able to expand their performance.

For now, however, the NASDAQ has shown a healthy end to 2023 and is poised to begin its last week of trading for this year. Let's see which way it goes.

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This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

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