The Nasdaq index reached a record high on Thursday, topping a record set 15 years ago during the height of the dotcom tech bubble.
The index had risen as much as 25 points, or 0.5%, to 5,060.14 by early afternoon, topping its all-time closing high of 5,048.62 on March 10, 2000. It ended the day at 5,056.06, up 0.41%.
The Dow Jones and S&P have recorded dozens of new highs since the end of the recession. While the Nasdaq has come close to topping its former levels until Thursday, it had always fallen short.
The index was the world’s first electronic stock exchange and has become the traditional home of many of tech’s biggest companies. Amazon, Apple, Cisco, Facebook, Google, Intel and Microsoft are all traded on the Nasdaq.
But in recent years it has diversified its portfolio of companies, and now includes high-flying biotech stocks including Amgen and Gilead Sciences. The shift may have broadened Nasdaq’s appeal, but it is still heavily weighted to the fortunes of the tech sector. Apple, the world’s most valuable company, is Nasdaq’s largest component, and its record-breaking share price run has helped propel Nasdaq’s rise.
It has taken Nasdaq 15-years to recover from the last big technology crash. On March 10, 2000, the Nasdaq Composite index closed at a record of 5,048.62, up 24% since the beginning of the year, and capping an amazing decade in which it skyrocketed over 1,300%.
Then the dotcom bubble burst. Nasdaq lost half its value in 2001 and reached an all-time low of 1,108.49 in October 2002.
This time, it’s different. At least according to some. Brian Jacobsen, chief portfolio strategist at Wells Fargo, predicted last month that the Nasdaq would soon reach 6,000. “Valuations are just very reasonable,” he told CNBC. “I think the big thing that is going to drive the market higher is people buying into the idea that the market isn’t going to fall out from underneath them.”
Others are less sure. Stephen Massocca, chief investment officer at Wedbush Equity Management, said the rise was being underpinned by monetary policy rather than fundamental value of the companies in the index. “Ultimately what’s driving this is low interest rates and easy money,” he said.
Investors have also bid up social media companies to “1999-2000 level”, he said. Massocca said social media stocks were the “Inner Station” – home to the crazed ivory trader Mr Kurtz in Conrad’s Heart of Darkness – at the centre of the story of Nasdaq’s new rise.
“I don’t know when it’s going to end but I know how,” said Massocca. He said that when investors start to believe the end is coming for the easy monetary policies in the US, Europe and Japan then there would be a “swift and violent” reaction in the stock markets.
Worries about a tech bubble have been growing as a new generation of tech companies have attracted sky high valuations. Uber, the taxi app comp[any, is now valued at $41bn, Snapchat, the ephemeral messaging service, is valued at $15bn.
Many industry leaders have raised concerns about a new asset bubble. Last month billionaire Mark Cuban, who made a fortune in the last tech boom, warned against the current appetite for tech.
“If we thought it was stupid to invest in public internet websites that had no chance of succeeding back then, it’s worse today,” he wrote in a blogpost.
