The Nasdaq is lighting it up. Here's why

Bored waiting for the Dow to break 20,000? Here's something more exciting to watch: The tech-heavy and record-breaking Nasdaq.

The Nasdaq Composite, the index best known for its high-profile tech members like Microsoft (MSFT), Amazon (AMZN) and Facebook (FB), has been lighting it up this year and notched yet another all-time high of 5,574 on Friday. The Nasdaq, typically looked at being more speculative due to its reliance on tech and biotech, is already up 3.5% this year. That almost makes the broad S&P 500 look like it’s sitting still with a 1.6% gain.

Tech stocks have some financial attributes making them winners from changes expected this year. "Although it took the Nasdaq a bit longer to participate in the Trump jump, the outlook has done a 180 from fear to seeing the amazing opportunity for Tech firms particularly," says Joe Kinahan, strategist at TD Ameritrade.

The Nasdaq's awakening has been somewhat pronounced this year. Over the past twelve months, the Nasdaq had been performing just about in-line with the Dow Jones industrial average. The Nasdaq is up 23.2% the past 12 months, which is nose-to-nose with the Dow's 23.1% increase during the same period. But now, the Nasdaq is luring attention from investors for a number of reasons, including:

* A boost from a weakening U.S. dollar. The price of the U.S. dollar has weakened this year, sliding roughly 1% against the euro and 2% versus the yen, according to data from Oanda. A weak dollar is a potential victory for technology companies since they get a higher percentage of their revenue from overseas than any of the 11 industry sectors, says Sam Stovall, strategist at research firm CFRA. When technology firms bring overseas profits back to the U.S., profits are worth more in U.S. dollars once the currency is translated.

* Strong performance by key stocks. Amazon and Facebook, two of the most valuable stocks in the Nasdaq, are having a good year. Facebook shares are up 11.6% this year - the best performance of any tech stock - and up nearly 35% over the past twelve months. Amazon shares are up 9% this year and have risen 40% over the past 12 months. Such big gains from these two stocks are important since they have the fourth and fifth largest weightings in the index. But the strength runs deeper, still. All five of the most valuable stocks in the Nasdaq, including Apple (AAPL), Alphabet (GOOGL) and Microsoft (MSFT) are all up this year and have gained an average of 2.8%.

* Broadening outside of tech. The massive market values of the tech giants put them in control of the Nasdaq. But when stocks outside of tech also participate, that lends extra power to the Nasdaq's rally. That's been the case this year, all five of the best performing stocks in the Nasdaq 100 are outside the technology sector. Three of the best stocks are healthcare stocks, including genetic analyst Illumina (ILMN), cancer treatment developer Incyte (INCY) and biotech Vertex Pharmaceuticals (VRTX). The other best Nasdaq stocks this year are consumer discretionary companies, cable operator Liberty Global (LBTYA) and online travel agent TripAdvisor (TRIP), which are up more than 14%.

Stocks swoon on Trump remarks; Nasdaq at new high

But while some are excited by the big Nasdaq gains, others express caution. "I think it has run too far too fast," Stovall says. Expect some Nasdaq choppiness as investors endure political battles. "(Tech stocks) have good profit margins and will be among the immediate beneficiaries of the Trumpconomic Brave New Capitalistic World," says Michael Farr, CEO of money manager Farr, Miller & Washington. But he adds, "there will likely be buying opportunities as political messiness churns through the sausage-making that is our legislative process."