“Nasdaq” Reaches again 5.000 points!

We had to wait fifteen years to see another time the Nasdaq to touch the 5.000 points level. Few analysts would have imagined that the Nasdaq would take so much time to reach again this historic level.

Now the question is: What ought to think the investors? May be they have to be afraid?

In fact this record level this time is a little different from the record of fifteen years ago. First of all because the index took too much time to reach this level and also the correction, if it happens, can’t be similar to the one in 2000. Second the valuation of the companies that make up the index are not similar to those on 2000, when much of the companies didn’t have earnings but only projected earnings. Third, fifteen years ago there was not so much liquidity coming from the QE.

nasdaq_5000_again

For sure the index has a strong technical and psychological resistance at these levels and investors probably expect a correction. The price/earnings indexes are inflated by all this excess of liquidity. Right now this index is in average 31.4 for the Nasdaq, not so cheap for people that want to buy. It would be prudent to wait for at least from 20 to 30 per cent correction of the index before starting to accumulate.

If the US economy continues to strengthen in the next two years and the Fed will wait another year before starting to raise interest rates, the earnings of the companies will increase even more from the actual levels and the Nasdaq index could continue to touch new records, without increasing more the price/earnings level.

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