In a decade of market-based extreme wealth creation, few assets did more than stocks in the NASDAQ 100 Index to enrich investors. Their total value soared by over $7 trillion, finishing with the greatest year since the start of the bull run.
Powered by a near-doubling in Apple Inc. and gains of more than 50 percent in Microsoft Corp. and Facebook Inc., the tech-heavy gauge has risen by 38 percent over the past 12 months, the largest since 2009.
Technology firms had to rebound from the dot-com crash for 15 years, coming full circle in 2015. They have doubled again since then.
Yet stocks still trade below their bubble-era highs compared to earnings for all the excessive appreciation. While today's 27-fold annual profit valuation isn't cheap, when the dot-com rally crumbled, it's a long way from the triple-digit ratios in place.
Doug Ramsey, Chief Investment Officer of the Leuthold Group, said that "we will never see those valuations again, and I still think that's true. We got closer than I would have predicted, which I think just 20 years later is quite amazing."
Leuthold conducts a chart tracking sales, dividends, cash flow and other metrics to compare then and now, a kind of Internet-bubble calendar showing where the market today is relative to the 1990s.
Not that there are two ages that will likely follow the same paths. Leuthold maintains the calendar to show how crazy things were 20 years ago. But even if a crash is not imminent, Ramsey said the data is not an all-clear signal to continue buying.
Even as they were beset by bad news, tech stocks were able to rally to records. The sector is subject to regulatory scrutiny, with Democratic presidential candidates and President Donald Trump stepping up criticism from technology firms themselves.
Tech firms, plagued by scandals, in the late 2010s saw sentiment turn against them, although not on the stock market. Users have become more leery about their smartphone providers and the cornerstones of social media.
As earnings are better established in public markets, growth is becoming more difficult to achieve. Profits are likely to drop in 2019 for many tech firms. For example, stocks of semiconductors are projected to decline by 15.4 percent, and hardware makers are projected to decline by 6.8 percent.
The sector is poised for a turnaround in 2020, with earnings growth expected to hit more than 10 percent, according to data from Bloomberg.
The red-hot run of the NASDAQ 100 was the victory of a handful of stocks over many, a state of affairs that sows doubt as well. According to data compiled by Bloomberg, Megacaps Apple, Microsoft, Amazon.com and Facebook collectively contributed nearly half of the Nasdaq 100 gains over the past decade.
