Is the BEAR MARKET Over?
The unemployment rate in the US is now 14.7% with economies all around the world crashing. But when we look at the NASDAQ Composite index $NSDQ100 , we see that is had positive returns this year. It did go into a bear market but it is already out of it. Is it? If we rely on the definition of bull and bear markets, then we are certainly in a bull market. The S&P 500 $SPX500 is also out of a bear market. The S&P 500 itself is her to mirror the performance of the 500 largest US companies. It should be the average of the returns of the NASDAQ and the New York Stock Exchange Composite (NYSE Composite). This is exactly what is happening but the spread has never been that big, even bigger than during the dotcom bubble. The five largest US companies, Apple $AAPL , Microsoft, Amazon, Google and Facebook are all the Nasdaq, and this is one of the reasons why we have this big spread. This is not really a problem since these businesses have been growing at very fast rates and changing the world in the process. But the stock prices of the Nasdaq companies have grown faster than the businesses with today the top 5 Nasdaq companies having an average PE ratio of 32, compared to 20 for the S&P 500. Usually, the stock market and economy should be moving in the same direction but this is not happening. Some of these Nasdaq companies have big influence on the markets without much influence on the economy. For example, Disney employs 26 times more people than Netflix, but Netflix has a higher market cap. Tesla $TSLA produced only 300 000 cars last year and employs 48 000 people, but has a much bigger market cap than GM which produced 10 million cars and employ 164 000 people. They also had higher revenues and paid more in taxes. Passive investing and algorithmic trading makes the valuations of these few big companies go even bigger. Another reason why stocks are going higher is the Fed printing money with unlimited quantitative easing. It is not because the Fed is going brrr that you need to invest in stocks. If the markets gain 10% and inflation is 6%, the real returns are only 4%. How to invest? Forget about the indices, about the market and focus on investing in great companies. There are several companies trading at bargain prices right now. Watch the full video on YouTube and Subscribe: https://www.youtube.com/watch?v=7lCWL8nWQiI&list=UUPO3uUyoXSaFWG-Ldq1mqEQ Here's the full analysis of the NASDAQ Bubble: https://ishfaaqpeerally.teachable.com/courses/662813/lectures/16808822 Join my private investing group on Facebook: https://www.facebook.com/groups/IshfaaqInvesting/