Nasdaq Composite Hits Record Highs

The Nasdaq Composite Index reached a new record high at more than 5,100 points. In March, it was already back above 5,000 points for the first time since March 2000. Despite the magnitude of the increase, it remains reasonable given the huge profits made by US technology companies.

The Nasdaq Composite Index, which lists the best US technology stocks, has climbed to 5,163 points yesterday, highest for fifteen years. It now exceeds its historic high last reached when the bubble in technology stocks was in full swing. Over the past five years it has increased by 134%.

Technology stocks now benefit from very favorable market environment, with improved results, abundant liquidity, oil prices plummeting, many mergers and acquisitions that drive up valuations. The US economy is growing and the fears over Greece have subsided.

Valuation levels are high at 22.5 times on average expected profit for the current year, but unlike the internet bubble there fifteen years, rising Nasdaq rests on solid foundations. It reflects the fact that the sectors that create the most value today are in the technology, software or Internet, with profits up sharply (+ 11.5% on average for companies in the Nasdaq this year, against 4.7% for the broad S & P 500).

Technological sectors are profitable, with a net margin expected at 8.6% on average this year. Unlike the 2000s, the technology sector is dominated by companies able to generate very high profits.

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Pete Southern

About Pete Southern

Pete is an active investor with knowledge of all sectors but his first love are IPO's. A failed day trader who now understands research. A love of economics and writing seen Pete begin to publish content for various finance blogs. Our main editor and collator of contributions, he is your point of contact via editorial at stockpricetoday.com

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