Nasdaq finally bests dotcom boom record
Nine straight quarterly rallies have lifted the index 67 per cent since the start of 2013, allowing it to recoup the losses of the technology crash
The Nasdaq Composite Index took 31 months to plunge 78 per cent after the internet bubble burst in 2000. Climbing out of the hole took more than 12 years.
Led by a 132-fold increase in Apple and a 13-fold jump in Google, stocks in the gauge on Thursday cleared the record 5,048 threshold that taunted investors for 15 years as a symbol of dotcom excess. The Nasdaq has advanced more than 350 per cent since bottoming in October 2002 after the slump erased about US$6 trillion from American equity prices.
"That was a totally different environment," said Jim Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management, which oversees US$338 billion. "We had sentiment that was through the roof and we thought we had reached the new era and forever more, it'd be different. You were valuing companies on clicks not on earnings, and I don't sense any environment close to that today."
Information technology firms earned US$194 billion from continuing operations last year, about 19 per cent of the S&P 500 whole, compared with US$67 billion in 2000, or 13 per cent, data compiled by S&P Dow Jones Indices show.
The list of Nasdaq 100 companies then and now highlights changes that swept a technology landscape that in 2000 was weighted toward money-losing telecom start-ups. Eight of the top 20 no longer exist as standalone public firms, including Sun Microsystems, WorldCom and Global Crossing.
Apple, now the world's most valuable company, did not even make the 30 biggest back then. Today's No3, Google, was four years from going public, and No4, Facebook, did not exist at the height of the dotcom mania. Nine straight quarterly rallies have lifted the Nasdaq Composite 67 per cent since the start of 2013, making it the last of the three main US equity benchmarks to reach records since the bull market began. The Standard & Poor's 500 Index and Dow Jones Industrial Average got there in March 2013.
"People have confidence the economy is in a stable area," Pat Becker, a fund manager at Becker Capital Management in Portland, Oregon, said. "It's tough to find growth out there so investors are attracted to the Nasdaq because for the most part, it does contain growth companies."