In One Chart: The Nasdaq’s recent record was historic in more ways than one

The Nasdaq Composite Index returned to record levels earlier this week, erasing all the losses it suffered in a recent decline. But while that all-time high was, in a sense, historic — though the index has hit dozens of records over the past year — it also represented a bigger milestone than investors may have realized.

On an inflation-adjusted basis, the Nasdaq’s COMP, -0.19%  recent peak allowed it to finally surpass 5,048.62, the record it touched at the top of the dot-com bubble in March 2000. It hit that milestone in late February and subsequently exceeded it, though it has since pulled back a bit.

“Adjusted for inflation, the Nasdaq is only 2.0% above the peak in 2000. That comes out to a whopping annualized return of 0.10% over the past 18 years. When someone says tech is in a bubble this chart screams that it is anything but,” wrote Ryan Detrick, senior market strategist at LPL Financial, which compiled this data.

So far this year, the Nasdaq has been by far the best performer of the major indexes. It is up 8.5% (not on an inflation-adjusted basis) compared with the 2.8% rise of the S&P 500 SPX, -0.57%  . The Dow Jones Industrial Average DJIA, -1.00%  is up about 0.1%.

The Nasdaq’s rally has largely come on the back of large-capitalization internet and technology companies. The technology sector is up 10.2% so far in 2018 and up 36% over the past 12 months, making it the top-performing S&P 500 sector over either period. Among the notable gainers, Amazon.com Inc. AMZN, +0.18%  has rallied 36% in 2018 and Netflix Inc. NFLX, +1.79%  is up 68%.

The Nasdaq’s tech-heavy focus has allowed it to avoid much of the market’s recent volatility, which came on concerns over trade protectionism and tariffs, two factors seen not having a big impact on tech.

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