The Nasdaq Composite Index, home to some of the world's largest technology and biotech companies, reached a milestone Tuesday, breaking for the 6,000 mark for the first time since its inception 46 years ago.
What does 6,000 mean? Is it that different from, say, 5,780? Not really. But it presents an important moment of reflection. First and foremost is the obvious: We're in a bull market, which has now lasted about eight years since the market bottomed in the first quarter of 2009 amid the Great Recession of 2008. Investors' confidence stems from the fact that corporate earnings are on the rise, unemployment continues to fall, the housing market is still booming, and consumers (for the most part) are feeling somewhat better about their financial situation.
All told, Nasdaq 6,000 -- as with when the index reached its last milestone of 5,000 in March 2000 -- says investors are in full-fledged "risk-on" mode. But the "risk" this time is founded on sound fundamentals and conservative investment principals. The fact that Warren Buffett recently double-downed on his Apple (AAPL) position near 52-week highs and bought shares of Sirius XM (SIRI) at under $5 bucks underscores how far along the market has come since Nasdaq first reached 5,000 seventeen years ago.
A lot has changed since then. In 2017, compared to 2000, corporate balance sheets are scrutinized more closely and, unless your name is Amazon (AMZN) or Netflix (NFLX), P/E ratios matter more now than they did when XYZ.com and EIEIO.com were selling paper earnings. These days, we can see strong revenue and profit growth from companies like Google (GOOGL) or with Facebook (FB) leading the charge.
Investors have also learned a lot in seventeen years. That's the optimist side in me talking, at least. I want to think we've learned since then. Besides Apple, Amazon, and Netflix, this time the Nasdaq is also being driven by the resurgence of software giant Microsoft (MSFT), which -- thanks to its cloud transformation -- is operating on all cylinders.
Ultimately, Nasdaq 6,000 was reached thanks to products like social networking, the iPhone, the cloud, online advertising, breakthrough biotech innovation, among other technologies. As with each milestone, there's the obligatory question of: "What's next?"
Nasdaq 7,000 is a matter of "when" not "if." My crystal ball says it won't take seventeen years to gain 1,000 points. The milestone will likely be reached thanks to, at least in part, autonomous cars. And this puts names like Tesla (TSLA) in the drivers seat. In that vein, another name investors should keep an eye on is Intel (INTC), which recently picked off Israeli self-driving technology company Mobileye (MBLY) for $15.3 billion.
With innovative tech companies steering Nasdaq into the 21st century, Tuesday's milestone is merely a checkpoint on the quest to help companies create, or maximize, their value.