How Tech Growth in 2015 Is Different from 2000 (and Why It Will Last)
The last time I saw 5,000 on the NASDAQ was way back in early 2000, prior to the collapse of the technology sector and all of the froth and euphoria on Wall Street. If you were trading back then, you would have recalled the staggering froth and frenzy that drove the technology sector to heights that were simply not sustainable and excessive.
Well, it took more than a decade, but it looks like the technology sector is on a roll again. I have been bullish on technology stocks as the top growth area in my outlook for this year and so far, this is panning out.
NASDAQ Push to 5,000 Much Different Now Than 15 Years Ago
The NASDAQ traded at its highest level since 2000 last Thursday, when the index came within 160 points, or 3.3%, of taking out the 5,000 level. A break above 5,000 would be a big deal for the technology sector.
Chart courtesy of www.StockCharts.com
Of course, the ascent of Apple Inc. (NASDAQ/AAPL) to nearly $130.00 a share and a staggering market cap of $741 billion is helping the index, providing stock market leadership.
As we near 5,000, there will be talk again of an exhausted and euphoric technology sector akin to 2000, but things are different this time around. The push to 5,000 has taken much longer and has been steadier versus 15 years ago, when everyone was buying without any thought to valuation or the underlying fundamentals.
I vividly remember seeing the big moves everyday and what I thought was the senseless buying of the technology sector. I recall friends taking out loans on their homes to buy the market. Some were up millions, only to fall prey to greed and subsequently watch their capital dissipate.
The buying back then was driven by the rise of the Internet and broadband. I recall the now-archaic method of dial-up Internet that ran at 58 kilobits per second, which took forever to load any graphics. The buying today continues to be driven by the Internet (which is now offered at such high speeds that a high-quality image can load in just a second), especially the mobile and social media spaces.
Tech Sector Worth Considering for Trades and Investments?
If you want the top growth opportunities, as a trader, you need to stick with the technology sector; if you’re investing, make sure you have ample diversification.
Those interested in the tech sector may consider taking a look at the small-cap technology growth stocks, many of which have been hurt by the selling in 2014, offering potentially good buying opportunities on weakness.
If you want to play the technology sector as a whole, you could look at tech-focused exchange-traded funds (ETFs), such as the Technology Select Sector SPDR ETF (NYSEArca/XLK) or the PowerShares S&P SmallCap Info Tech ETF (NASDAQ/PSCT). ETFs were not around during the 2000 tech boom, but they now offer a nice alternative to individual stock plays.