15 years later, Nasdaq testing new high
Time is the best cure. Some investors may remember the burst of the
tech bubble in 2000. At the time, people
were talking about Microsoft, Intel, Oracle, IBM and bunch of drugs companies
with a biotech kick like Amgen. eBay, Priceline.com
and Amazon.com are the few survivors while many dot com companies have been
forgotten. Nasdaq Composite Index crashed
from 5,132.5 to in March 2000 to 3,042.6 in May 2000 and the Index drifted even
lower to 1108.5 in October 2002. No one
had the mood to predict when the index could see 5,000 level again. 15 years passed and the US market has been
going up for 6 straight years from 2009 to 2014. Many analysts have tried to make the bear
call and got run over by the bulls.
Nasdaq Composite Index has more than doubled in 5 years from 2,400 level
to above 5,000 in March 2015. While the
index approached its peak, the troop is now very different. The new kids on the block are Facebook,
Tesla, Baidu and the newer and bigger Apple.
If one simply sat on their Nasdaq index fund since February 2000, they
may have made 13.7% in 15 years including cash dividend which translates to
0.86% return per year. The total return
of QQQ, the most popular Nasdaq ETF listed in US is 204% since February 2005
and 156% since February 2010. Investors
could have learnt two lessons from the Nasdaq drama. Buy and hold could mean a very long wait for
very little if the entry point was badly timed.
Average buying or monthly installment could be a better strategy for
long term investment.
Media have taken off the spotlight from
Greece for a while and people have been focusing on the US Fed FOMC
meeting. The market generally expects US
rate hike in June. This is probably the
milestone for the end of a 6 years rescue plan from the 2008 Global Financial
Crisis. With the USD going strong across
the board and US stock market at historical high level, US have managed a
perfect landing from the turbulence.
Many Wall Street experts are saying EUR is
heading to parity with USD. Chanel has
cut prices of their handbags in markets outside Europe. Chanel shops in Hong Kong and China were swept
as price tags of the classic Chanel handbags were slashed by as much 20% in the
local currency. EUR 2000 black leather
bags were sold out in a day and there were constant queuing outside the shop. It was headline news. Before Chanel, Patek Philippe also reduced
prices in Asia by 15-20% in the local currency.
This is odd as the public was expecting a price hike from the Swiss
maker due to Swiss Franc appreciation.
These are classic examples of the advantage of how exporters could be
benefited from a weakening currency.
Bordeaux wine prices have been weakening in UK for couple of years
already and they were probably the leading indicators of luxury market
trend. Euro zone would probably need to
export their way out of this Euro crisis as domestic economy remains fragile. Tourism will definitely help and one can
notice there are more and more high-end retail shops and department stores with
mandarin speaking sales staff to serve the 4 million Chinese tourists visited
Europe in 2014. This is similar to 20
years ago when shop keepers in Beijing learn English to greet the American and
European tourists. Will it take European
stock markets 15 years to get back to its peak?
Eurostoxx at 3,700 and 5 years and 3 years performance are 63% and 62%
respectively. The historical high of 5,522.4
in March 2000 seems so far away.
China stock market was turbo charged in
2014 with a 52% rally after years of bear market. The popular MSCI A50 index was up 1.8% and 30.7%
in 5 years and 3 years in their local currency or 9.4% and 35.5% in GBP. The Chinese government accepts a slower
economic growth and target 7% GDP growth rate.
The government has changed its gesture since last year to a more
accommodating monetary policy to cushion the struggling property and
commodities sectors. Please note that it
is just a cushion to soften the impact to the overall economy due to the hard
fall of these sectors. Property
developers, steel, iron, copper and coal business are still hanging dry and
struggle to get loans from banks. Their
funding rates are generally over 10% per year while the underlying asset prices
are also falling. India stock market is
a star performer among the BRIC countries and its stock market has gone up 33.4%,
35.9% and 41.8% in a 5, 3, 1 years horizon in GBP terms. One efficient way to capture these markets is
through mutual funds or ETFs.
