Yesterday the Nasdaq index reached a new all-time high, above 15,690 points.
Nasdaq, record days
On Tuesday, it had closed at 15,580, but shortly after markets reopened, it jumped 0.7% in a matter of minutes yesterday. Since 23 August it has continued to climb, up 3.5% in 12 days.
From 27 July to 20 August it had been fluctuating in a zone between 14,800 and 15,200 points, but when the markets reopened on Monday 23 August a new upward phase began.
This growth phase, which had started at the end of May, only seemed to have stopped at certain points. In recent months the Nasdaq 100 Index has risen by almost 28%, while since the March 2020 crash the overall growth now stands at over 165%, in less than a year and a half.
Looking further back in time, compared to the post-financial crisis level of 2008, the current level is 1,400% higher. This is a truly remarkable performance in about 12 years. This multi-decade growth took place in four phases.
The first lasted from 2009 to 2015, with the index rising from around 1,000 points to around 4,700. After a brief decline that lasted only a couple of months, a second phase of growth was triggered from March 2016 to February 2020, with the index rising to 9,600 points before a crash in March last year took it back below 6,800 points.
From April 2020 onwards there were two further phases of significant growth, most likely due to the measures taken for the pandemic crisis.
In particular, the huge amount of dollars created by the Fed and injected into the financial markets seems to have played a crucial role in the increases at the height of the pandemic, so much so that from 6,700 in March 2020, the Nasdaq 100 more than doubled in the following ten and a half months.
The fact is that, after a brief retracement in March of this year, and another very brief one in May, it has gone back up.
Since 17 May, it has had 13 positive weeks out of 16, about the same as last year at the same time.
Fed monetary policy and its expansion
Given that US economic data have never been particularly bright in all this time, it is possible that the Fed’s expansionary monetary policy is the main reason for these continued rises. It should be noted that for the time being the Fed does not seem willing to reduce the stimulus it has been providing to the financial markets for many months now, in the form of dollars created out of thin air.
Many argue that the Nasdaq cannot rise forever, and that sooner or later a new retracement could come. Many argue that this is actually a bubble that has been inflating for too long, and that sooner or later it could burst, but as long as the Fed’s monetary policy continues to be so expansive, this does not seem likely to happen.
We’ll have to see if, when it does, it’s just a normal retracement, as has happened several times in the last 12 years, or a full-blown crash.