Benchmarking the Nasdaq to an Exponential Model

High, Medium, and Low

The Nasdaq has taken a big hit lately and sometimes it’s hard to know where the index stands in relation to long-term trends. To assess this, I drafted three exponential trend lines based on a large set of historically sampled index simulations:

Now, these three fits are somewhat subjective but do provide a helpful visual benchmark. I won’t bore you with the details of fitting these, so just take me for my word that I did a decent amount of analysis to support their reasonableness. At the end of the day though, they are just lines.

What these lines help us understand is where stocks are currently trading versus some guidelines for potential overvaluation or undervaluation. We can see that current market conditions are just around the median trend, so we have to wonder just how much further this downturn has to go. Time will tell!