Three reasons why Nasdaq 5000 really is different this time
Advertisement
Reuters/Carlo Allegri
Advertisement
When this last happened in 2000, the composite index came tumbling right back to almost 1,000 as stocks and valuations crashed when the dotcom bubble burst.
But is it different this time?
In a note Friday, Gluskin Sheff's David Rosenberg points out three reasons why this time, it might really be different:
- Tech stocks are much cheaper now than they were then. "The S&P 500 Tech sector today commands a 15x forward price-to-earnings multiple whereas in 2000, that multiple was 30x and fraught with massively inflated earnings forecasts," he wrote.
- Compared to treasuries, the yield from tech stocks is much higher. The dividend yield is 1.5%, similar to a five-year note, whereas in 2000, the yield was nearly 0% versus 6.5% on the 10-year.
- "It is not just tech any more." Almost 60% of Nasdaq market capitalization was made up of tech stocks in 2,000, compared to a little over 40% today. The percentage of Health care, financial and consumer stocks on the index has climbed over the years.
So, calling a tech bubble based on Nasdaq 5000 alone is difficult, Rosenberg wrote.
Advertisement
And as Barron's reported last week, the Nasdaq's current valuation is well supported by strong earnings and cash flows, not on a dream.
And for an idea of how close we are, here's a chart.
Gluskin Sheff
Advertisement
- 2 states where home prices are falling because there are too many houses and not enough buyers
- US buys 81 Soviet-era combat aircraft from Russia's ally costing on average less than $20,000 each, report says
- A couple accidentally shipped their cat in an Amazon return package. It arrived safely 6 days later, hundreds of miles away.
- 9 health benefits of drinking sugarcane juice in summer
- 10 benefits of incorporating almond oil into your daily diet
- From heart health to detoxification: 10 reasons to eat beetroot
- Why did a NASA spacecraft suddenly start talking gibberish after more than 45 years of operation? What fixed it?
- ICICI Bank shares climb nearly 5% after Q4 earnings; mcap soars by ₹36,555.4 crore