April has been a rough month for most US stocks, but the Nasdaq Composite index was particularly hit hard. As home to many high-flying tech stocks, the index saw a sharp correction in lofty valuations as tariffs were unveiled to the world. And while the index has since recovered some of these losses, the year-to-date performance is still in the red.
In fact, if an investor had bought £10,000 worth of shares in a Nasdaq Composite tracker fund at the start of 2025, they’d now have around £8,750 – a painful £1,250 loss in the space of just a few months. The loss would have been even greater for investors who panic-sold in the days following the US ‘Liberation Day’ at around £2,000.
But with the markets seemingly calming down, could buying Nasdaq stocks today unlock superior investment returns in the long run?
Volatility’s likely not yet over
Looking across the Nasdaq, there are still plenty of tech stocks trading at a lofty valuation even after the recent slide. In some cases, paying a slightly cheaper premium may be a sensible move in the long run. However, premium-priced stocks are often some of the most heavily affected by volatility. And while markets have indeed calmed in recent weeks, we’re not out of the woods yet.
A new trade war with China’s now underway. And a return to massive sweeping tariffs is only a couple of months away if countries and regions don’t come to a new arrangement with the US. Both of these are catalysts for uncertainty. So while stocks might have stabilised for now, another slide could emerge as we approach the tariff pause deadline.
With that in mind, it’s not so surprising that The Economy Forecast Agency has projected the Nasdaq Composite index could fall a further 24% by July this year!
Investing during volatility
There’s no guarantee that stocks will fall further moving forward. After all, if the geopolitical trade environment suddenly improves, US stocks will likely continue their upward recovery streak. But assuming further declines will materialise, the timing of this drawdown remains unknown.
As such, the most prudent approach to capitalising on such volatility is likely through a dollar cost-averaging buying strategy. That’s especially appropriate for businesses whose impact from tariffs may take a while to materialise.
Take Wix.Com (NASDAQ:WIX) as an example. The online website builder service and e-commerce platform have achieved tremendous growth in recent years. In fact, over the last half-decade, revenue has expanded by an average of 12% a year, and profits even began to emerge in 2023.
The bulk of this stems from customer subscriptions. However, in the long run, the primary source of income likely won’t be subscriptions but transactions of online purchases moving through its platform. Right now, transactions only account for around 12% of sales. But as we’ve already seen with its larger peer Shopify, that could quickly change.
As transaction revenue becomes a more prominent part of the business, Wix’s sensitivity to economic cycles and potential recessions increases. After all, lower consumer spending means fewer online transactions. Even today, a weak economy could be a headwind as demand for new websites from businesses and individuals falls — a risk that investors must consider before jumping in.
