4.  Strong earnings growth helps keep valuations attractive.

Y2K: Earnings were nonexistent for many Nasdaq companies, and according to index data its price/earnings ratio at times exceeded 200 through multiple expansion.

Today: Nasdaq stocks currently trade at about 23 times earnings.

5.  The climb has been strong and steady.

Y2K: Nasdaq rallied 95% from the October 1999 low to the March 2000 high.

Today: The index’s rise has been more gradual, only 21% from October 2014 to March 2015. (Source: BAML)

Top Ten Nasdaq Stocks by Market Cap, Then & Now

Source: Nasdaq

But, one thing that remains from Y2K is the iShares U.S. Technology ETF (IYW), which launched in May 2000. Today, the fund includes mature technology firms that survived the bubble to become among the 100 largest U.S corporations by revenues. And IYW does not contain telecom stocks.

Nasdaq’s latest 5,000 tally is garnering a lot of attention, and rightfully so. But the quality of mature technology companies today appears to be more solid than they were in 2000. We learned the hard way—earnings matter.


Sources:  Bloomberg, unless otherwise noted.


Heidi Richardson is a Global Investment Strategist at BlackRock, working with Chief Investment Strategist Russ Koesterich. She is also the lead investment strategist for iThinking. You can find more of her posts here.