USA TODAY International Edition
Nasdaq setting records but without bubble talk
Just like tech- stock boom of 2000, index powers Wall Street
The Nasdaq composite, led by tech titans Apple, Facebook and Amazon. com, has raced past the 6,000 mark, posted a fresh record Tuesday and again is a market leader, but there’s been scant talk of a 2000- style price bubble.
Sure, there are similarities between today’s Nasdaq and the one that ended in a flameout 17 years ago. Just like 2000, a handful of big- name stocks with life- changing technologies are leading the advance. There’s also a slew of innovative technologies, such as social media, data storage in the “cloud,” artificial intelligence and robots. And the Nasdaq again is outperforming the other major U. S. stock indexes, up nearly 15% so far in 2017.
But there are key differences that make this Nasdaq less susceptible to the kind of downturn it suffered in 2000, when it cratered 78%, says Ryan Detrick, senior market strategist at LPL Financial. “To us, it comes down to valuations,” he said. “We are nowhere near where they were back then, so it doesn’t make it feel as bubble- icious.”
At the peak in 2000, the average Nasdaq stock was trading for more than 100 times earnings, compared with today’s price- to earnings ratio of 23, which is not nearly as inflated based on historical norms.
Today’s Nasdaq companies also are making money, unlike Pets . com, the online seller of pet sup- plies that never turned a profit and went bust about nine months after it started trading as a public company in 2000. By contrast, in the most recent quarter, iPhone maker Apple posted net income of $ 11 billion on $ 53 billion in sales. Facebook, which is approaching 2 billion users worldwide, reported profit of $ 3.1 billion. Both stocks are up more than 30% this year.
“Tech seems to be where the growth is,” said Andrew Adams, market strategist at Raymond James.
But if any tech giants stumble, if market sentiment turns irrationally exuberant like in 2000 or if investors who have bet big on the Nasdaq suddenly opt to get out simultaneously, the Nasdaq could run into trouble again.