Thirty Percent of Investors See Nasdaq’s New Record Highs as a Rising Bubble

In this week’s Sentiment Survey special question, we asked AAII members to share their thoughts about the new record highs set by the Nasdaq composite.

More than one-third of respondents (35%) say the new record highs were primarily driven by large-cap companies, especially companies in the technology industry. This compares to 30% of respondents who say this indicates a rising market bubble which will likely result in a recession. About 15% of respondents say the Nasdaq does not reflect actual market health and the market is too optimistic. Additionally, 10% of respondents say that they think the Federal Reserve’s efforts to support the economy are the main driver of the market highs. Other respondents say that they think the market will correct after the election (4%).

Here is a sampling of the responses:

• “The shares of too few companies drive the market’s cumulative results and fail to convey the broad weakness of the economy. I fear this is a formula in the U.S. for a more realistic retrenchment of the overall market. The Nasdaq’s highs appear to be vulnerable.”
• “It’s a bubble. Eventually, the coronavirus pandemic is going to tank the economy and cause a recession. Technology and medical/pharmaceutical companies are hot right now but will eventually take a hit due to the coronavirus.”
• “There is a disconnect between the economy and the stock market. Furthermore, the performance of the Nasdaq is being driven by only a few large-cap technology companies.”
• “I believe that a correction is coming as valuations are too high, but the market will continue to grind higher because of all the Fed liquidity in the market.”
• “The market currently is ignoring the pending liquidity crisis. Eventually, the Fed goodie truck will be empty.”

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