Can the Nasdaq keep soaring in 2022?

Gains are never a sure thing, but 2021's Nasdaq performance shows what's possible.

2022 sign being constructed.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The stock market has been roaring ahead in the last part of December, with investors taking full advantage of a Santa Claus rally to enjoy further gains. The Nasdaq Composite (NASDAQINDEX: ^IXIC) has been lagging behind the record performances of its fellow benchmarks, but even the Nasdaq saw solid gains on Thursday afternoon, rising more than half a percent as of 1:30 p.m. ET.

Nasdaq stocks have pulled back somewhat in the past month, but the index has nevertheless been a stellar performer in 2021. That has many investors wondering whether 2022 could bring even better gains for the index -- or whether they should tone down their expectations after such an impressive run.

Huge gains continue

There's still more than a day of trading before Wall Street closes the books on this year. But based on where the Nasdaq stands today, 2021 will go down as another successful year that defied many people's expectations.

The Nasdaq is up more than 22% so far for the year. That marks the ninth gain in the past 10 years for the index. Over that span, the Nasdaq has risen more than 500%, for an average gain of almost 20% per year.

What's especially impressive about the Nasdaq's performance this year is that it followed two even stronger years. The index rose 35% in 2019 and then 44% in 2020, despite seeing a big bear market move downward at the beginning of the COVID-19 pandemic in March 2020. This year's economic rebound has helped bolster sentiment about the stock market generally, and even a cooling of interest in high-growth tech stocks hasn't hurt the Nasdaq dramatically.

What will 2022 bring?

It's tempting to think that after three strong years that have produced gains of almost 140%, the Nasdaq is due for a downward year. It's true that there's always a chance of an extended stock market pullback. There's no question that valuations are at levels that many investors find stretched at best, with some seeing the potential for a crash being well above average.

However, the same arguments have been true in the past, and the Nasdaq hasn't always done what investors feared. 2021 is a great example, as some believed that the pandemic merely pulled forward demand rather than creating sustained growth. Many Nasdaq stocks are well off their highs from earlier in the year, but on the whole, the index has defied bearish calls.

The Nasdaq's run of gains in the 2010s is an even stronger example of how betting on a pullback can be costly. Three years of double-digit percentage returns from 2012 to 2014, including a 38% rise in 2013, led many investors to believe a pullback in the Nasdaq was imminent. However, the index continued to rise for the next three years, including a 28% jump in 2017. When the decline came in 2018, it was mild, with investors suffering losses of just 4%.

What to watch

Even with those long-term assurances, you can bet that investors will watch certain things closely. The Federal Reserve could play a key role, with its interest rate policy decisions having a big impact on high-growth stocks. Also, those who own individual stocks will look for the companies most likely to outperform the index.

Trying to guess whether a given year will be a winner or a loser is usually more costly than successful. The best way to proceed is to keep a mindset that puts you into top-quality stocks that you can hold for the long haul. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 9 January 2025

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on International Stock News

Confused African-American girls in casual clothing standing outdoors and comparing information on smartphones.
International Stock News

Better artificial intelligence (AI) stock for 2025: Nvidia vs. Microsoft

Nvidia has significantly outperformed Microsoft stock over the past couple of years.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
International Stock News

3 subtle investing mistakes I won't repeat in 2025 and beyond

You can avoid the mistakes I made...

Read more »

A bemused woman tries to choose between two slices of cake she holds on two plates.
International Stock News

What's the better long-term investment: The Nasdaq-100 or the top S&P 500 growth stocks?

Investing in top growth stocks can be a great way for investors to grow their portfolios in the long run.

Read more »

man looking happy and excited as he looks at his mobile phone
International Stock News

Jensen Huang just delivered incredible news for Nvidia stock investors

At the CES 2025 technology conference, CEO Jensen Huang highlighted a new multitrillion-dollar opportunity.

Read more »

Happy young couple doing road trip in tropical city.
International Stock News

Why electric vehicle stocks like Tesla just rallied

Wondering what caused Tesla and these other EV shares to pop?

Read more »

a woman with her hands over her face splits her fingers over one eye so she can peep through them.
International Stock News

Will Nvidia stock fall below $100 in 2025?

A worrisome precedent has been set by market leaders of game-changing technologies and innovations.

Read more »

An elephant standing on a chair looking down at a mouse
International Stock News

Should you buy shares in the largest company in the world?

Today, about half of the 20 biggest companies by market value are in the technology industry.

Read more »

a couple clink champagne glasses on board a private aircraft with gourmet food plates set in front of them. They are wearing designer clothes and looking wealthy.
International Stock News

Tesla stock vs Amazon: Billionaires are buying one and selling the other

Several Wall Street billionaires have been making some moves!

Read more »