The Nasdaq Is Partying Like It’s 1999. What To Do About It.

Forbes - July 16, 2020


Are investors ready for another Housequake?

Depending on your age, your view of the Nasdaq is different. If you are a baby boomer or older, you remember the time when “Nasdaq” might have been a slang term for Nirvana (the concept or the band, or both).


DETROIT, MI - NOVEMBER 4: American singer Prince (1958-2016) performs onstage during the 1984 Purple ... [+] Rain Tour on November 4, 1984, at the Joe Louis Arena in Detroit, Michigan. (Photo by Ross Marino/Getty Images)

If you are under 50 years old, the Nasdaq is where the big, stable companies sit. Amazon, Microsoft, Apple, Facebook, Google, etc. They are the big, ubiquitous stocks and businesses that run our lives. Let’s Go Crazy!

However, back in the 1990s and the first part of this century, the Nasdaq was the Wild West of the stock market. Brazen young upstart businesses took the markets by storm. The gains were so amazing, they were considered “one-decision stocks: you buy them and don’t have to sell them.” 1999 was essentially a one-type market. It was all-Nasdaq, all the time.

Then, in March of the year 2000, the Nasdaq 100 NDAQ fell by over 79% in just under 3 years. Oh, it fully recovered...by the year 2015! Enough said.



Delirious

Now, of course, nothing like this could ever happen again. OK, of course, it could. But you don’t need a garden-variety 80% selloff to see that the same type of “Nasdaq will save us” attitude has quietly crept back into the stock market. Now, much of today’s investor base did not experience 1999, 2000, and the 15 long years that followed for the Nasdaq Index. So, all of this history is lost on them.

And that’s how we get graphs like the one above. This is simply the latest snippet of time that shows that the Nasdaq is in a world of its own. Since the quick little spill 5 weeks ago (in which the Nasdaq 100 ETF held its ground pretty well), the stock market at large has been pretty mediocre, or worse.

Sign ‘O The Times

The average S&P 500 stock was down over 10% from June 8 - July 7. The Dow was down over 6%. But the Nasdaq 100? It was up 6%.

One of 2 things is happening here. A new paradigm, or something that will be remembered as the second coming of the Dot-Com Bubble. Fool me once, shame on you. Fool me twice, shame on me.

Baby, I’m a Star

Better yet, as The Who said, we won’t get fooled again. So don’t. Know what you own and why you own it. And recognize that one of the most powerful axioms in investing is this: if it looks easy, that’s when the risk is highest.



Rob Isbitts Senior Contributor




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