A VERY DIFFERENT NASDAQ

By Burt White Chief Investment Officer, LPL Financial
Jeff Buchbinder, CFA Market Strategist, LPL Financial

Weekly Market Commentary

The Nasdaq Composite just hit 5000 today as this report was going to press and is nearing its all-time record closing high of 5048 set during the peak of the internet bubble in March 2000. The 15-year journey back to these highs after the bubble burst included two recessions along the way — one of them “Great.” This accomplishment has sparked renewed concerns that the Nasdaq’s ascent reflects a stock market bubble that may soon burst. Even with the Nasdaq at 5000, based on valuation and sentiment measures, we do not believe stocks have reached bubble territory. As we walk down memory lane to the days when we got stock picks from cab drivers and chat rooms, we see that the Nasdaq’s foundation is much stronger today.

ANOTHER BUBBLE?

To assess whether the Nasdaq reflects excessive speculation that has historically characterized bubbles, we look at several measures of valuation and sentiment. A comparison between where these measures stand today and their levels back in 2000 reveals that the environment then was very different. This comparison enhances our comfort with our positive stock market view, based on our investment process incorporating fundamentals, valuations, and technical analysis.

See our infographic, A Very Different Nasdaq,
for more comparison of 2000 and 2015.

Get the Full Market Report Here: Market Commentary 03022015

3215 infographic