2026 Prediction Of The Nasdaq 100
I need to know this because when I am writing long term covered calls I do not want to cap my upside if I am writing calls out 12 months or more.
There are several different looks and reasonings you can take to get your final number for the Nasdaq 100. I compare my findings, to professional wall street analysts then I look up their rational and how they came to that number. These guys are only right 47% of the time and routinely underestimate the market so I don’t want to rely on what they say to much. I would rather be more aggressive than less when it comes to predicting 2026.
The main things that count when doing a valuation of any kind are the following: 1) Earnings growth 2) Interest rates 3) Investor sentiment: are investors willing to pay those multiples for that earnings growth?
Can we meet or exceed earnings growth of 15-18% for 2026? (we are in a earnings driven market right now, people paid up for potential last year for AI, now we want to see the results in the financials)
What will Kevin Warsh do with interest rates? (sources say there is a 60-65% chance of cutting at least once this year, I think he will cut at least once, Trump would not have picked him if he didn’t think he would).
Are investors willing to continue to pay high 30+ multiples for the QQQ?
Currently the Nasdaq 100 sits at 25,322.95.
Trailing P/E 33.6
Forward P/E 23.84x
Summary Table February 2026
Indices Forward P/E
Nasdaq 100 (NDX): 23.84
Scenarios
Aggressive: p/e 27x
Base Case: year end p/e 23.84x
Bear: year end p/e 20x
The equation to get the year end price of the Nasdaq 100
End of year price target = (current price/current fwd. P/E) X (1+Growth rate) X Target end of year P/E
Base Case
= 25,322.95/23.84 = 1,062
= 1,062 X (1+0.18) = 1,253
= 1,253 X 23.84 = 29,871
= 29,871/40.5 = $737.56 (QQQ price target)
Base case based on wallstreet analysts are $685 -$715.
Notes: other scenarios
The current Nasdaq 100 sits at 25,322 based on the forward P/E and growth rate of 18% we get the Nasdaq to 29,871.
Scenario 1: The "Interest Rate Pivot" (Target 27x P/E)
This happens if the 10-year yield drops toward 3.5%. When bond yields drop, investors are willing to pay more for tech growth, pushing the P/E up.
Current Earnings Base: $25,322/23.84 = 1,062
Weighted Growth (18%): 1,062 X 1.18 = 1,253
Expanded Multiple (30x): 1,253 X 27 = 33,831
QQQ Target: $33,831/40.5 = $835.33
Scenario 2: The "Bond Market Scare" (Target 20x P/E)
If inflation stays "sticky" and the 10-year yield climbs to 4.75% or 5.0%, the "multiple" will likely contract back to its 10-year average of around 20x.
If we miss earnings estimates or growth slows we could get a repricing even if earnings or growth is off slightly than what is expected.
Assume we miss earnings by 5%, we get a new earnings base of 1,008 (1,062 *0.95)
Assume things go back to the mean for P/E which for forward P/E is around 20.
Assume we don’t get the growth we expected. Assume 9% (estimates are currently 15-18 percent).
Take new earnings base from missed earnings: 1,008 X 1.09 =1,098.72
Assume repricing of index to 20x earnings. 20 X 1,098.72 =21,974.4
We get a decline from current levels from to 25,322 to 21,974.4 for a decline of 13.2%.
QQQ new price 21,974/40.5 = $542.57
Let’s just assume a 10-20 percent drop from current levels because that is what most analysts are expecting for bear case scenarios.
We need these earnings to meet or exceed expectations and we need growth to stay elevated. A tall order, everything is priced for perfection right now.
Alternate Scenario Notes: Many analyst are expecting a modest year compared to the last decade in the Nasdaq 100. Things that could really cause a correction or things that would influence current valuations of the index are if people decide the multiple I am paying is to much and they liquidate and move into other sectors that are non tech and communications focused. If we get the unwillingness to pay the high multiple due to interest rates, earnings slightly miss or don’t outperform, cap ex fatigue, growth doesn’t pan out…investors will flee and revalue the companies in the index.
Since forward P/E is less than trailing P/E this implies the market expects positive growth in earnings, a forward P/E takes an estimate of future earnings and takes the total market cap of all 100 stocks in the Nasdaq 100 and divides them = current market cap/total estimated earnings next 12 months. So based on the future earnings projections we get a number for P/E that is less than trailing P/E which is around 32-33. Another thing wall street wants to see is are we growing those earnings? Are we growing the earnings at the expected rate (15-18%)? If earnings growth estimates don’t pan out we will get a contraction in multiples.
Examples:
Valuation Reset: We don’t believe these companies are worth X anymore, we priced in growth that did not come through or rates rose.
Current Price: 25,322
Implied Earnings: 25,322/23.84 = 1,062
Multiples Contract (20): 1,062 * 20 = 21,240
Earnings Miss
Current Price: 25,322
Implied Earnings: 25,322/23.84 = 1,062
Miss by 5% = 1,062 *0.95 = 1,008
Earnings are missed, investors are no longer willing to pay 23.84 forward P/E, they are willing to pay 20x. 20 * 1008 (new earnings) = 20,160
Earnings Growth Slows & Market Gets Scared
Instead of 15-18% earnings growth we get 11%. 1,062 *1.11 = 1,178
P/E multiple that was once 23.84 goes to 21.
21 X 1,178 = 24,738
Market said I was willing to pay the higher multiple for higher growth but with the slower growth I am going to pay less.
Everything I am talking about is in regards to valuation. Read my valuation tab to learn more about valuation: https://www.belvedereinvestmentsco.com/valuation
Extra Notes:
To truly understand stock predictions, you have to realize that a stock price is actually two different things working together. Think of it like a car on a highway.
Earnings are the engine. If the engine gets bigger (more profit), the car naturally has more power to go faster.
P/E Multiple is the transmission. It determines how much of that engine's power actually hits the road. If the transmission is in a high gear (high P/E), the car flies (market expects high growth and/or earnings knock it out of the park). In a low gear (low P/E), the car drags even with a huge engine.
How earnings growth affects everything?
Earnings are the "reality" of the business. When we say the Nasdaq 100 has 18% growth, we mean the companies are literally selling more products or cutting costs to keep 18% more cash at the end of the year.
The Price Connection: If the P/E stays exactly the same, the stock price will move 1-for-1 with earnings.
Example: If a company earns $10 and the stock is $100 (10x P/E), and next year they earn $12 (+20%), the stock will naturally go to $120 if people still want to pay that same 10x.
What makes the P/E multiple move?
The P/E is the "mood" of the market. It represents how many years of profit an investor is willing to pay right now to own the future of that company’s earnings. Review my valuation tab that goes more into P/E: https://www.belvedereinvestmentsco.com/valuation.
Why Multiples Go Up (Expansion - "The Bull")
Lower Interest Rates: This is the #1 driver. When the "Risk-Free Rate" (Treasury bonds) pays 2%, a 25x P/E stock looks like a bargain. When bonds pay 5%, that same stock looks expensive.
Growth Acceleration: If a company was growing at 10% and suddenly jumps to 30% (like Nvidia did with AI), investors will "re-rate" it. They’ll pay a 40x multiple today because they expect the earnings to be massive in three years.
Scarcity: If tech is the only sector making money while the rest of the economy struggles, everyone piles into the same 100 stocks, bidding up the "P" (price) while the "E" (earnings) stays steady.
Why Multiples Decline (Contraction - "The Bear")
Rising Interest Rates: High rates are "gravity" for P/E ratios. If you can get 5.5% in a savings account, you aren't going to pay a 35x multiple for a risky stock.
Maturation: When a "Growth" stock becomes a "Value" stock (like Apple or Google in certain years), people stop paying for the "potential" and start paying for the "reality." The multiple "contracts" from 40x down to 20x.
Fear/Uncertainty: If there is a threat of a recession, investors get scared. They don't want to pay for future earnings because they aren't sure those earnings will even exist. They demand a "discount," which drops the P/E.
The most explosive moves in the Nasdaq (up or down) happen when Earnings and P/E move in the same direction at the same time.
The Moon Shot: Earnings grow +20% AND the P/E expands from 25x to 30x.
Result: The stock doesn't go up 20%... it goes up 44%.
The Crash: Earnings stay flat (0% growth) BUT the P/E contracts from 30x to 20x because of high interest rates.
Result: The company is still making the same amount of money, but the stock price crashes 33%.
When growth stays flat or declines the present value of the future cash flow decreases. If it goes from 10% growth to 0% growth the market will re-rate the value of the company/index.
Stock Market Shakeout: don’t fight US equities when we have a friendly growth environment. AKA: earnings growth is leading price, potential rate cuts, inflation contained at 2-3%, GDP growing steadily to above average, QE started again in December 2025
