The stock market has been extremely volatile recently. Volatility is great for Day and Swing Traders like myself, but can be very stressful for others. Just in the past few days, there has been a noticeable trend of money moving out of the Nasdaq 100 and into the Dow Jones Industrial Average (Dow). This article will hopefully be able to provide you with the reasons behind this transfer of money and give some insight to investors looking to navigate the changing tide.

Before I look at the reasons, let me just explain to the beginning investor the difference between the Nasdaq 100 and the Dow. The Nasdaq 100 is a tech-heavy index comprised of the largest non-financial companies listed on the Nasdaq Stock Exchange. It includes the modern day titans of industry like Apple, Microsoft, Amazon, Alphabet, and Nvidia just to name a few. By looking at the Nasdaq 100, you will get a good barometer for how the entire technology sector is performing in the market on any given particular day or specified timeframe.

The Dow, however, is a price-weighted index of 30 very popular companies, spanning a variety of industries, including technology, healthcare, consumer goods, and financial services. The Dow represents a broader spectrum of the U.S. economy, offering a mix of growth and value stocks along with some big tech names also. Some of the big DOW 30 companies are Coca-Cola, Home Depot, Visa, Nike, and McDonald’s just to name a few!!!

One of the primary reasons for the recent capital shift from the Nasdaq 100 to the Dow is growing concern over the tech sector. Tech stocks have experienced meteoric rises over the past decade, but this rapid growth has also led to high valuations. Investors are becoming wary of these elevated valuations, fearing that they might not be sustainable in the long term.

In my opinion, the recent regulatory scrutiny by our 2 presidential candidates on big tech companies is intensifying. Not only in the US, but governments worldwide seem to be looking more closely at issues such as antitrust violations, data privacy, and market monopolies. This increased scrutiny can potentially lead to new regulations that could impact the profitability and growth prospects of tech giants. Just today, Joe Biden and Donald Trump were talking about tightening policy’s on Chip Making giants like Taiwan Semiconductor, Nvidia, and AMD. These possible upcoming regulations are certainly affecting NASDAQ 100 securities and not impacting the DOW as harshly.

Remember that diversification is a fundamental pillar of sound investing. By reallocating funds from the Nasdaq 100 to the Dow, some investors may be looking to diversify their portfolios. The Dow, has always tended to offer a more balanced approach and can help cushion against sector-specific risks. For more information on invest be sure to follow Investment Mob across social media.

Happy Trading,

Jeff from Investment Mob