15 years later, Nasdaq testing new high

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.