Articles

What Sets the U.S. Apart?

Mar 03, 2015

Once again, I’m pleased to announce the Dow Jones Industrials (DJI) average and the Standard and Poor’s 500 (S&P 500) index established new record highs in the latest month.

2015 03 03 Stock Markets Graphic

Reaching all-time peaks has been a common monthly occurrence over the past two years for both indices, as they have been on relatively steady upward trajectories since early 2013.

Prior to the Great Recession, the DJI and S&P 500 both achieved their previous cyclical zeniths in October 2007, at 13,930 for the former and 1,549 for the latter.

Versus the first of those benchmarks, February 2015’s month-end closing DJI was +30.2%.

Relative to the second, the comparable percentage change for the S&P 500 was +35.9%.

The Toronto Stock Exchange (TSX) would dearly love to claim the same bragging rights. Alas, that’s not to be.

During its previous period of cyclical strength, the TSX did manage greater longevity. It topped off eight months later than the DJI and S&P 500, at 14,715 in May 2008.

Unfortunately, its subsequent gains have been more modest than the other two indices.

Compared with May 2008, the January 2015 month-end closing figure for the TSX was only +3.5%.

The TSX deserves credit, nonetheless, for an unexpected degree of perseverance. Given the sharp drop in the world price of oil and the reduced expectations for the profits of Canada’s numerous energy corporations, the TSX has done well to be +7.2% year over year and +3.8% month-to-month.

Canadian equities have been bolstered by the drop in value of the loonie (i.e., Canada’s currency) which, because it offers price bargains, has caught the attention of international investors, Plus there are the opportunities inherent in the northern economy’s close ties with the U.S. America is currently setting the standard for increasing-prosperity among all industrialized nations.

Now we come to the main attraction. The DJI, S&P 500 and TSX have all been ‘opening acts’ to charge up the audience for the featured performer, NASDAQ.

NASDAQ closed out February of this year at 4,964. That was a gain of 73.6% versus the mini-spike achieved by the index in October 2007.

But NASDAQ’s remarkable story has been somewhat sidelined by the fact it briefly touched 5,000 once before, in February 2000, when the dot-com boom was in full swing.

The follow-up bursting of that bubble, when the taste for vastly overvalued start-up firms turned sour, sent NASDAQ into the wilderness for the next nine years.

There’s a comparison of numbers that best illustrates NASDAQ’s current incredible achievement. How have all four indices – the DJI, S&P 500, TSX and NASDAQ − performed since their most recent trough levels, which in every instance occurred in February 2009?

Since then, the TSX is +87.5% (i.e., almost double); the DJI is +156.7% (i.e., a factor two-and-a-half times as great); and the S&P 500 is +186.4% (i.e., almost three times as high).

NASDAQ is +260.2%. That’s an increase of more than three-and-a-half times. In other words, we’re in ‘get rich quick’ territory.  

A strong case can be made that the aspects of the U.S. economy that set it apart from the rest of the world are the appetite for innovation, comfort with risk-taking and willpower to dominate markets that are embodied in the DNA of the firms that make up the NASDAQ index.

The catalogue of firms in NASDAQ includes: Adobe; Amazon; Apple; Cisco; Comcast; DirecTV; Dish Network; EBay; Electronic Arts; Facebook; Google; Intel; Intuit; Microsoft; Netflix; Qualcomm; Sirius; Symantec; Vodafone; and Yahoo.   

No other country has a similar presence in leading-edge digital and big data companies.

Nor is this latest peak for NASDAQ likely to prove as vulnerable as the spike in early 2000.

2000 was characterized by ambitious and enthusiastic possibilities. 2015 is the butterfly that has emerged from that cocoon.

2015 is a world full of life-altering electronic gadgetry and accessories. Who among us doesn’t possess or take pleasure in smart phones, laptops, entertainment apps and social media sites?

The entrepreneurs who founded the companies in NASDAQ are today’s business ‘rock stars’.

They bring a unique perspective to the immigration question. They know the continued success of their enterprises will depend on attracting the best intellectual talent to America from around the world.

Contributions from their personal wealth – in large measure acquired through IPOs and share value appreciations – are being courted by aspirants to become Commander in Chief. Keep an eye on the number of times declared and undeclared candidates for the 2016 Presidential election travel to the West Coast to dip their toes in the fundraising waters.

Their overt and backroom political influence is surfing higher on a digital tide.

Stock exchanges - performances of key indices - February 27, 2015
INDEX 52-WEEK LOW 52-WEEK HIGH YEAR AGO
(FEB 28, 2014)
MONTH AGO
(JAN 30, 2015)
Latest Month-end Closing Prices
(FEB 27, 2015)
  PER CENT CHANGE,
LATEST VERSUS
52-WEEK LOW 52-WEEK HIGH YEAR AGO MONTH AGO
Dow Jones Industrials
NYSE (^dji)
Apr 11 14
16,015
Feb 25 15
18,244
16,322 17,165 18,133 13.2% -0.6% 11.1% 5.6%

S & P 500
NYSE (^gspc)

Apr 11 14
1,814
Feb 25 15
2,120
1,859 1,995 2,105 16.0% -0.7% 13.2% 5.5%
NASDAQ
(^ixic)
Apr 11 14
3,992
Feb 27 15
4,989
4,308 4,635 4,964 24.3% -0.5% 15.2% 7.1%
S & P/TSX Composite
TSX (^gsptse)
Dec 15 14
13,636
Sep 3 14
15,658
14,210 14,674 15,234 11.7% -2.7% 7.2% 3.8%
Sources: New York Stock Exchange (NYSE), Standard and Poor’ s (S & P), National Association of
Securities Dealers Automated Quotations (NASDAQ), Toronto Stock Exchange (TSE) and Reuters.
Table: CMD.
Latest-year performances of key stock market indices
Latest-year performances of key stock market indices
*Each month's closing figure versus the February, 2014 closing figure for the index.
The Key Stock Market Indices are:
1) New York Stock Exchange - Dow-Jones Industrials (30);
2) New York Stock Exchange - Standard and Poor's (S & P) (500);
3) National Association of Securities Dealers Automated Quotations - NASDAQ Composite Index;
4) Toronto Stock Exchange - S & P/TSX Composite.
Data sources: New York Stock Exchange (NYSE), Standard and Poor’ s (S & P), National Association of
Securities Dealers Automated Quotations (NASDAQ), Toronto Stock Exchange (TSE) and Reuters.
Chart: CMD.
Performances of key stock market indices since most recent trough
Performances of key stock market indices since most recent trough
*Each month's closing figure versus the February, 2009 closing figure for the index. February 2009 was the most recent trough for all 4 indices.
The Key Stock Market Indices are:
1) New York Stock Exchange - Dow-Jones Industrials (30);
2) New York Stock Exchange - Standard and Poor's (S & P) (500);
3) National Association of Securities Dealers Automated Quotations - NASDAQ Composite Index;
4) Toronto Stock Exchange - S & P/TSX Composite.
Data sources: New York Stock Exchange (NYSE), Standard and Poor’ s (S & P), National Association of
Securities Dealers Automated Quotations (NASDAQ), Toronto Stock Exchange (TSE) and Reuters.
Chart: CMD.
S & P/TSX Composite
Toronto Stock Exchange
S & P/TSX Composite
New York Stock Exchange - Dow-Jones Industrials (30)
New York Stock Exchange - Dow-Jones Industrials (30)
New York Stock Exchange - Standard and Poor's (30)
New York Stock Exchange - Standard and Poor's (30)
NASDAQ Composite
(National Association of Securities Dealers Automated Quotations)
NASDAQ Composite
The charts show month-end closing figures.
Data sources: New York Stock Exchange (NYSE), Standard and Poor’ s (S & P), National Association of
Securities Dealers Automated Quotations (NASDAQ), Toronto Stock Exchange (TSE) and Reuters.
Charts: CMD.


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