Understanding this indicator
The Nasdaq Composite covers Nasdaq-listed shares and offers a view of a market with substantial technology and growth-company exposure. What does Nasdaq Composite tell us beyond the latest rally or sell-off? A stock index captures the changing prices of the companies it represents. Those prices reflect earnings expectations, financing conditions and investor confidence. Looking at the index through a cycle lens helps place individual market moves within a longer sequence of strengthening and weakening performance.
We use monthly index observations and compare each month with the same month a year earlier. The annual change is calculated from the ratio of the two levels using logarithms, which makes successive price changes easier to compare. This is a view of price performance; dividends and an investor’s currency conversion can make an actual investment return different.
The year-on-year series answers how the market has performed over the past year. Above zero means the index is higher than a year earlier; below zero means lower. Direction matters as well as level: a negative reading moving upward can mean losses are narrowing, while a positive reading moving downward can mean gains are fading. Neither necessarily describes the direction of the latest month’s return.
Compare the local cycle with the Global Equity Cycle to see whether the market is participating in a broad move or following a different path. Differences can reflect sector composition, domestic conditions and valuation changes. The comparison provides context for further investigation rather than treating one index as a complete measure of its economy.
The green line isolates the 3–4-year Kitchin cycle from the historical data; it is a fitted cycle, not a forecast of the next turn. The lower chart shows the 7–10-year Juglar cycle and the 15–25-year Kuznets cycle. Comparing these time scales can reveal why a shorter upswing sometimes sits within a much longer period of weakness. The two main-chart axes use different scales, so compare their timing and direction rather than the height of one line against the other. Historical curves may change as the data are updated.