Mature, Calm, Rational Nasdaq Surpasses Pre-Bubble High

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NASDAQ Tops Intraday Trading Record Set In 2000
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The Nasdaq composite (^IXIC) has finally recovered all of the ground lost when the dot-com bubble burst back in March of 2000.

That will go down as one of the worst busts in stock market history. After peaking at 5,048 in March 2000, the Nasdaq lost 78 percent of its value, far more than the Dow Jones industrial average (^DJI) or the S&P 500 (^GSPC).

And while the Nasdaq has been clawing its way back to where it once was, the Dow industrials have soared to 154 new record highs since then, and the S&P has racked up 116 new highs, according to data from S&P Dow Jones Indices.

The Nasdaq closed Thursday at 5056.06, up nearly 21 points.

So now what? Analysts and pundits often like to say: "it's different this time around." But is it really?

Grounded in Reality

In many ways it is. "It's night and day, the differences," said Bob Turner, chief investment officer of Turner Investments. He says valuations in March of 2000 were way out of whack. "IPOs were coming in left and right, coming public without revenue. It was speculation at its most extreme level. It was the tulip mania."

Gone now are most of the highly speculative issues like, eToys or, which now provoke groans or nervous laughter instead of visions to get rich quick. The Nasdaq itself is a very different index. Instead of having nearly 5,000 listed stocks as it did back then, it now has around 2,500. And in the go-go days of 1999, you couldn't read a stock market story that didn't refer to the index as "the tech-heavy Nasdaq." Yes, tech still plays a big part, but it no longer dominates the way it used to, and more importantly, there are far fewer companies built on a wish and a prayer. Instead many of the new tech leaders, like Google (GOOG), Amazon (AMZN) and Facebook (FB) have billions of dollars in annual revenue. And of course Apple (AAPL) is now the world's most valuable company, with a market cap of about $750 billion -- and a profit last year of $39.5 billion.

"Back when you had the Internet bubble, there wasn't really much of an Internet," notes Turner. "We'd do a dial-up connection on AOL that took forever to connect. ... But now everyone has a computer in their hand. Everyone has the ability to have hardware and software for a fraction of the cost it once did."

Mature, Calm and Rational

As a result, many analysts contend that today's Nasdaq is much more mature than it was 15 years ago. Market watchers say that trading now, especially on the Nasdaq, is very calm and very rational.

That's not to say that market won't have a correction or a downturn in the coming weeks or years, but most experts say another crash is unlikely. "To have a crisis you have to have excesses," according to Turner, "and it's hard to see anything that would be very disruptive to global market overall."

Still, many people remain wary of getting back into stocks after enduring the pain when the Internet bubble popped and again when the financial crisis hit in 2008. Many investors lost their nest-eggs, and are reluctant to go through that again.

For them, experts advise that they keep putting money into 401(k) or other retirement plans every paycheck, whether the market goes up or down, stay the course over the long haul, and invest in low-cost, index-based mutual funds.
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