{"id":69121,"date":"2015-03-06T04:11:32","date_gmt":"2015-03-06T09:11:32","guid":{"rendered":"http:\/\/countingpips.com\/?p=69121"},"modified":"2015-03-06T06:50:50","modified_gmt":"2015-03-06T11:50:50","slug":"three-reasons-why-the-nasdaq-will-hit-a-record","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2015\/03\/three-reasons-why-the-nasdaq-will-hit-a-record\/","title":{"rendered":"Three Reasons Why the Nasdaq Will Hit a Record"},"content":{"rendered":"
March 6, 2015<\/div>
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By WallStreetDaily.com<\/span><\/a> \"Nasdaq<\/p>\n

By Louis Basenese<\/a>, Chief Technology Analyst <\/em><\/p>\n

On Monday, the tech-heavy Nasdaq Composite closed above the 5,000-point level for the first time since March 2000.<\/p>\n

As a result, the exchange is now within spitting distance of its all-time closing high of 5,048.62 and intraday high of 5,132.52, which were hit right before the dot-com bubble burst<\/a>.<\/p>\n

In the month of March, no less.<\/p>\n

Does that scary coincidence mean the Nasdaq is setting up for another epic crash and burn?<\/p>

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And if not, how much higher can we reasonably expect the Index to rise?<\/p>\n

The answers might surprise you\u2026<\/p>\n

Dear, Investors\u2026 It\u2019s Just a Number<\/h2>\n

The Nasdaq\u2019s return to dot-com glory levels naturally brings out the naysayers.<\/p>\n

For instance, Janus Capital\u2019s Bill Gross told CNBC this week that the Nasdaq hitting 5,000 represents a \u201clittle bit of a bubble.\u201d<\/p>\n

But should we really expect anything less than pessimism from a dyed-in-the-wool bond investor? Calling stocks attractive runs counter to his makeup and<\/em> business pursuits at his new firm!<\/p>\n

Regardless, any fearmongering (or hype) surrounding the 5,000-point milestone ignores one key fact\u2026<\/p>\n

There\u2019s nothing fundamentally significant about 5,000. We\u2019re talking about a purely symbolic and psychological level.<\/em><\/p>\n

Now, sure\u2026 I\u2019ll accept that sentiment influences investors\u2019 actions. But all-time highs aren\u2019t anything new. In fact, they\u2019re actually kind of a requirement for markets that trend higher over time\u2026 which they do!<\/p>\n

In fact, the Nasdaq\u2019s fellow major indexes \u2013 the Dow and S&P 500 \u2013 have hit new, all-time highs with regularity over the last year. So the Nasdaq is playing catch-up, and its high this week was long overdue.<\/p>\n

So let\u2019s keep the focus squarely on the actual fundamentals<\/em> that are driving the rally \u2013 and whether or not they\u2019re likely to continue \u2013 instead of obsessing over an arbitrary number, or fretting about dot-com-bubble history repeating.<\/p>\n

Quoted in the Los Angeles Times,<\/em> John Lonski, Chief Capital Markets Economist at Moody\u2019s Analytics, says, \u201c[The Nasdaq] doesn\u2019t resemble the speculative excesses that were in effect when it last set a record high.\u201d<\/p>\n

Speaking of which\u2026<\/p>\n

Three Factors That Will Propel the Nasdaq to Record Highs<\/h2>\n

We can attribute the Nasdaq\u2019s return to 5,000 to three key factors. And if they continue, it\u2019s reasonable to expect the rally to do likewise.<\/p>\n

Nasdaq Catalyst #1: The Fed<\/h2>\n

\u201cThe Nasdaq wouldn\u2019t be here if not for quantitative easing. It wouldn\u2019t be here without zero-percent interest rates.\u201d<\/p>\n

So says Peter Schiff, CEO of Euro Pacific Capital.<\/p>\n

I don\u2019t typically agree with Schiff. But I do in this case\u2026 at least partially.<\/p>\n

The Fed\u2019s easy money policies<\/a> have certainly inflated asset prices. Tech stocks included.<\/p>\n

But it\u2019s a bit of a stretch to claim that the Fed has manufactured the Nasdaq\u2019s rise to 5,000. Especially given a much more obvious and powerful catalyst at work\u2026<\/p>\n

Nasdaq Catalyst #2: Tech Is Everywhere!<\/h2>\n

As I stressed on CNBC on Monday<\/a>, unless you\u2019re Amish, technology<\/a> now pervades all aspects of our everyday lives. Ditto for every sector of business.<\/p>\n

From communications to healthcare, banking to shopping, energy to automobiles\u2026 is there any corner of the market that isn\u2019t increasingly influenced by technology?<\/p>\n

With that in mind, the Nasdaq\u2019s climb to 5,000 is more emblematic of technology\u2019s maturation and dominance in everyday life \u2013 for consumers and businesses alike.<\/p>\n

Consider that the technologies that were dreamed about during the dot-com era \u2013 and which received too much premature funding \u2013 have now finally come to fruition and flourished.<\/p>\n

As Kevin Kelly, Chief Investment Officer at Recon Capital Partners, points out, the Nasdaq\u2019s rally is \u201cshowing the robustness of America\u2019s intelligence and innovation.\u201d<\/p>\n

Indeed! And the increasing real-world value of both, too.<\/p>\n

Nasdaq Catalyst #3: Apple<\/h2>\n

Since we\u2019re on the topic of tech ubiquity, Apple<\/strong> (AAPL<\/a>) reigns supreme as the poster child for it.<\/p>\n

If you don\u2019t own an Apple device, it\u2019s probably because you live in an emerging market and can\u2019t afford one yet. Or maybe you\u2019re just anti-Apple.<\/p>\n

Regardless, we can\u2019t underestimate the significance of Apple becoming the world\u2019s largest and most profitable company<\/a>, based on its most recent quarterly report.<\/p>\n

The company now comprises a remarkable 10.1% of the Nasdaq , compared to a mere 0.2% at the Index\u2019s record high in 2000.<\/p>\n

Simply put, as Apple\u2019s stock goes, so goes the Nasdaq. And Apple\u2019s been going pretty well lately, thanks to its above-average growth rates. The stock is up 74% (and counting) over the last 12 months.<\/p>\n

The Case for the Rally Continuing<\/h2>\n

Like I said, continued momentum for the Nasdaq hinges upon the three catalysts above.<\/p>\n

Let\u2019s assess each one\u2026<\/p>\n

The Fed:<\/strong> Will the bank keep inflating asset prices? Most likely. Despite removing the key policy language of \u201cconsiderable time,\u201d Fed Chair Janet Yellen pledged to be \u201cpatient\u201d on raising interest rates.<\/p>\n

\u201cDovish\u201d to \u201cless dovish\u201d is still positive for stocks in general \u2013 and, by extension, the Nasdaq.<\/p>\n

Tech:<\/strong> Will America keep innovating and commercializing new ideas? Absolutely! I see it on a day-to-day basis, as I meet with the country\u2019s newest innovators.<\/p>\n

If you need a data point to hang your hat on before believing the same, try this:<\/p>\n

Patent filing applications by U.S. companies and citizens increased by 7% in 2013 (the most recent data available). That\u2019s enough to help the United States retain the top spot in the list of the world\u2019s most innovative countries, based on patent grants.<\/p>\n

Apple:<\/strong> Will Apple keep leading the way? You bet! There\u2019s nothing holding the company back from more domination.<\/p>\n

But the next question becomes, \u201cHow high can the Nasdaq reasonably go?\u201d<\/p>\n

Nasdaq 6,900?<\/h2>\n

Interestingly, not only have the S&P 500 and Dow hit new all-time nominal highs, they\u2019ve also exceeded inflation-adjusted 2000 highs.<\/p>\n

As for the Nasdaq? Not so much.<\/p>\n

The Index would need to rally to about 6,900 \u2013 38% higher \u2013 to achieve the same feat.<\/p>\n

Now, let me be clear: I\u2019m not offering the inflation-adjusted level as my prediction of where the Nasdaq is heading with certainty. Rather, it\u2019s to provide perspective that there\u2019s still ample room to run.<\/p>\n

That\u2019s especially true when we take valuations into account.<\/p>\n

During the final days of the internet boom, the Nasdaq traded at an eye-popping P\/E ratio of 175. Today, it sports a P\/E of 23.<\/p>\n

Granted, that\u2019s a premium multiple to the S&P 500, which currently trades at a P\/E of 19. But the Nasdaq has always commanded a premium multiple because of its perceived high-growth potential, so this isn\u2019t unusual.<\/p>\n

Bottom line: It\u2019s taken 15 years for the Nasdaq to reclaim the 5,000-point level. But this time around, the fundamentals suggest the rally is far from overheated.<\/p>\n

Ahead of the tape,<\/p>\n

Louis Basenese<\/p>\n\n\n\n
Editor\u2019s Note:<\/strong> It\u2019s no secret that the extraordinary growth potential of the technology sector \u2013 and the fast-growing, innovative companies within it \u2013 has made countless billions for investors.But with the Nasdaq on the rise, it\u2019s not just the usual tech suspects that can make you a fortune. We\u2019re hot on the trail of a little-known, powerful network of individuals busily helping to create thenext<\/em> generation of dominant tech firms like Apple, Google, and Microsoft. Indeed, these billionaires have already<\/em> helped create more multi-billion-dollar companies than any other group of people in Wall Street history. If you want to invest in today\u2019s hottest tech firms right alongside these guys \u2013 and at pre-IPO prices \u2013 go here to find out how<\/a>.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The post Three Reasons Why the Nasdaq Will Hit a Record<\/a> appeared first on Wall Street Daily<\/a>.<\/p>\n

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 <\/p>\n","protected":false},"excerpt":{"rendered":"

By WallStreetDaily.com By Louis Basenese, Chief Technology Analyst On Monday, the tech-heavy Nasdaq Composite closed above the 5,000-point level for the first time since March 2000. As a result, the exchange is now within spitting distance of its all-time closing high of 5,048.62 and intraday high of 5,132.52, which were hit right before the dot-com […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-69121","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/69121","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=69121"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/69121\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=69121"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=69121"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=69121"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}