Nasdaq 100: Is Now the Time to Buy the Dip?

The Nasdaq 100 has long been a barometer of technological optimism, but its current valuation, momentum, and macroeconomic backdrop present a nuanced case for investors. With the index trading at a trailing P/E of 32.44 as of August 2025—within one standard deviation of its 5-year average of 30.00 but above its long-term average of 24.81—the question of whether to “buy the dip” hinges on reconciling growth expectations with historical norms [1]. The price-to-book ratio of 4.69 further underscores a premium valuation, significantly higher than the 5-year average of 3.53 and the 10-year average of 2.25 [2]. While these metrics suggest the market is pricing in robust future earnings, they also highlight the risks of overreliance on unmet expectations.

Momentum indicators, however, paint a more bullish picture. The index has recently broken above its 50-day and 200-day moving averages, forming a potential bullish reversal pattern [3]. The 14-day RSI, which had dipped into oversold territory in early August, has since surged above a descending resistance line, signaling a shift in investor sentiment [4]. Meanwhile, the 10-Day Put-Call Ratio (Open Interest) of 0.7690 reflects a strong call bias, while the put-call volume ratio of 1.08 suggests hedging activity is limited, indicating confidence in continued upward movement [5]. These technical signals align with the index’s 22% rebound in Q3 2025, fueled by earnings strength from the “Magnificent 7” and easing trade tensions [6].

Macroeconomic resilience provides further support. The U.S. economy’s 3.3% Q2 2025 GDP growth—driven by AI-driven business investment and robust consumer spending—has insulated the Nasdaq 100 from broader risks [7]. The Federal Reserve’s cautious approach to rate cuts, despite sticky inflation and a 4.1% unemployment rate, has preserved a stable environment for tech stocks [8]. However, rising tariffs and geopolitical tensions have introduced volatility, with commodities like gold and copper gaining traction as hedges [9]. This duality—tech optimism versus macroeconomic uncertainty—has led to a strategic shift in portfolios, with investors allocating 30–40% to the Nasdaq 100 while hedging with gold and copper [10].

The case for buying the dip rests on balancing these factors. While the Nasdaq 100’s valuation is stretched by historical standards, its momentum and macroeconomic tailwinds suggest the index can withstand near-term headwinds. Investors should, however, temper enthusiasm with caution: a diversified approach that includes defensive sectors and commodities may better navigate potential corrections. As the Fed’s policy stance remains data-dependent and AI adoption rates evolve, the Nasdaq 100’s trajectory will likely reflect both the promise of innovation and the perils of overvaluation.

Source:
[1] Nasdaq 100 PE Ratio Charts, Data [https://www.gurufocus.com/economic_indicators/6778/nasdaq-100-pe-ratio]
[2] Nasdaq Price/Book Ratio 2010-2025 [https://www.macrotrends.net/stocks/charts/NDAQ/nasdaq/price-book]
[3] Nasdaq 100 Technical: Potential bullish reversal at 50-day moving average [https://www.marketpulse.com/markets/nasdaq-100-technical-potential-bullish-reversal-at-50-day-moving-average/]
[4] Stock Market Breadth & Momentum - Nasdaq 100 [https://streetstats.finance/markets/breadth-momentum/NQ100]
[5] Navigating the Crossroads of Tech and Commodities [https://www.ainvest.com/news/navigating-crossroads-tech-commodities-strategic-guide-balancing-nasdaq-100-exposure-2025-2508]
[6] The Nasdaq-100 in 2025: Balancing Growth and ... [https://www.ainvest.com/news/nasdaq-100-2025-balancing-growth-overvaluation-shifting-market-2508]
[7] US Economy Grows 3.3% in Second Quarter, Government Says [https://www.usnews.com/news/business/articles/2025-08-28/us-economy-grows-3-3-in-second-quarter-government-says-in-second-estimate-of-april-june-growth]
[8] Fed Treads Lightly as Economic Data Remains Mixed [https://www.chathamfinancial.com/insights/fed-treads-lightly-as-economic-data-remains-mixed-8-25-25]
[9] Monthly Market Insights | August 2025 [https://www.intrua.com/campaigns/monthly-market-insights]
[10] The U.S. Economy's Resilience: Implications for Equity and Fixed Income Markets [https://www.ainvest.com/news/economy-resilience-implications-equity-fixed-income-markets-2508]