We are writing this note to provide an analysis of recent market trends, specifically regarding the Nasdaq and its valuation in relation to key economic indicators.
The Nasdaq’s market capitalization has reached an unprecedented 176% of the US M2 money supply. This ratio signifies that the total market value of the Nasdaq is now nearly twice the total stock of liquid money in the economy, surpassing the peak of the 2000 Dot-Com Bubble by approximately 45 percentage points. Historically, such a significant rise in stock prices has never so dramatically outpaced the growth of the money supply.
Furthermore, the Nasdaq’s market capitalization relative to US GDP has also risen to a record 129%, nearly double the level observed during the Dot-Com Bubble.
Given these historical highs in market valuation ratios, we believe it is prudent to consider a close review of any Nasdaq-centric portfolios to assess the risks embedded within.
We are available to discuss this analysis and its implications for your portfolio at your earliest convenience.
