Harry Peterson
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Why Nasdaq at 5,000 makes sense this time

Like a drunk to a bottle — or John Travolta to an unsuspecting starlet — when a major index sees a big round number, it just has to have a taste. And the Nasdaq is staring down 5,000.

The tech-heavy index has crept above this level before, of course. All the way up to 5,049, to be exact. But that was ages ago, and that magical 5,000 dot-com assault lasted all of two days before the Nasdaq lost 80% of its value over the next few years.

But now is not then. Investors are still comparing the scars from that era. The fantasy that was the Internet bubble has been replaced by performance more accurately reflecting the current state of the companies driving it, according to Gavin Baker of the Fidelity OTC Portfolio fund FOCPX, -0.01%

“What was propelling the Nasdaq in the year 2000 was a dream. What’s driving the Nasdaq today is reality,” he told Barron’s. “The current valuation is very well supported by earnings and cash flows, and if those earnings and cash flows continue growing, the Nasdaq should continue going up.”

Perhaps. It’s bogging a bit this morning, and our call of the day certainly doesn’t see an appetite for risk growing in the near term. He’s calling for a double-digit decline before the resumption of the bull run (see call of the day). For now, however, it’s quiet out there. That will change later this week when the earnings start rolling in and Janet Yellen does her thing.