Have I told you about that time Sean and I got kicked out of the Tokyo Stock Exchange?
I’ll save that story for another day.
But I will say this: The coolest part about the Tokyo Stock Exchange is not the exchange itself.
It’s that it’s in Japan.
And the food there is amazing.
There’s a 7-11 next to the Philippines Stock Exchange in Manila that includes a secret passage to a speakeasy.
Outside the Bombay Stock Exchange in Mumbai, they actually have a giant bronze bull, just like the one on Broadway in New York City.
There are plenty of stock exchanges around the world with plenty of secrets and surprises. That I can tell you from experience.
But there is nothing like the New York Stock Exchange.
And it’s not even close.
I don’t just mean in terms of architecture, history or what it represents.
I’m talking specifically about the stocks that trade on the exchange.
The most important stocks on the planet trade on the NYSE.
In fact, a large percentage of the biggest 100 listed companies aren’t even American.
You’re getting a lot more exposure to international stocks, small-caps, and mid-caps.
And there are more economically sensitive areas like Financials and Industrials represented that you won’t get on other exchanges, such as the Nasdaq.
If you take all the stocks on the NYSE and create a composite index, this is what you get:
And the NYSE Composite Index just put in its highest-ever monthly and quarterly closes.
Never has the index comprising all the stocks listed on the most important exchange in the world been this high… ever.
One thing we know for a fact is asset prices trend.
And when indexes are making new highs, there’s a much much higher likelihood we see more new highs… and then even more after that.
Who’s No. 2?
We can go back and forth about whether the Dow Jones Industrial Average or the S&P 500 – or something else – is the most important stock market index.
That’s a valid debate, for sure.
But the most important exchange? No one disagrees.
The NYSE is it.
So, fine.
Who’s No. 2, then?
After much debate and deliberation, I think it’s probably the exchange just uptown from the NYSE.
It’s the one buried in the middle of Times Square.
Sorry Frankfort Stock Exchange, it’s the Nasdaq.
Let’s be real: The U.S. is just that dominant when it comes to capital markets.
The NYSE is No. 1.
And No. 2 is the Nasdaq, just up the road.
Here’s the index of all the stock listed on that exchange:
The Nasdaq Composite just hit new all-time highs on a monthly and quarterly basis too.
The Nasdaq is different from the NYSE in meaningful ways.
You’re not going to get all those Banks and Energy companies up at the Nasdaq.
More than 60% of the Nasdaq’s total weighting is Technology stocks.
Another 18% is Consumer Discretionary – think Amazon.com (AMZN).
You’re not getting any Materials, almost no Energy, no Real Estate, no Consumer Staples, and little to no Industrials or Financials.
To be sure, the Nasdaq is NOT “the stock market.”
The Nasdaq is the Nasdaq.
It’s it’s own thing.
And, in my book, after the NYSE, the second-most important exchange is the Nasdaq.
I’d like to chalk this one up to American Exceptionalism.
But the truth is, a ton of foreign stocks trade on the NYSE, especially among the big ones.
So it’s not an “American” thing.
It’s just the way the world works.
Everybody’s Wrong
Almost no one I know looks at the NYSE Composite Index.
They’re focused so much on the S&P 500 and the Nasdaq100 and even the Russell 2000.
And they forget about the stocks on the world’s most important exchange.
I was told by a millennial trader recently that it’s funny how I look at “exotic indexes” such as the Nasdaq Composite.
This guy literally called the index made up of the stocks that trade on the second-most important exchange in the world “exotic.”
Meanwhile, the Nasdaq Composite dates to February 1971, decades before he was even born.
It’s got the Street cred.
It’s earned my respect.
But I’m still telling you: Everybody’s wrong.
Keep a close eye on these two indexes, not just in this environment, always.
But look at the NYSE Composite first.
Stay sharp,
JC Parets
Founder, TrendLabs