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Inside The Stock Market Internals

“It’s been a banner year for stocks. The Dow and S&P 500 have been in record territory since March, while the Nasdaq has been trading at its highest levels since 2000.

Though the robust gains have ignited some worries that stocks may be overvalued, most experts believe that a dose of skepticism is actually healthy and predict that stocks will continue to rise next year, albeit at a more modest pace.

Still, the fact that the Nasdaq is back at a level it last traded at during the tech bubble worries some investors. But experts say the Nasdaq is a completely different animal than it was at the start of the millennium.

“The Nasdaq has really grown up over the last decade. It’s a lot more mature now,” said Kim Forrest, senior equity analyst at Fort Pitt Capital.

For one, the Nasdaq is no longer as tech-heavy as it used to be.

Tech stocks still make up about 42% of the Nasdaq composite, but it was nearly 60% at the height of the tech bubble, according to the Nasdaq OMX (NDAQ). And the exchange has welcomed more companies from the retail sector, health care, and financials. Energy, materials and utility companies, which virtually had no presence on the Nasdaq a decade ago, are also now a small part of the exchange.

Nasdaq sectors

“The Nasdaq is definitely not nearly as lopsided as it used to be,” said Ryan Detrick, senior technical analyst Schaeffer’s Investment Research. “Having more diversification gives the index a whole different feel, and helps its safety factor.”

Even the top 100 companies….”

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