At a Glance
- Three periods in the life of the Nasdaq 100 show investors’ relationship with tech stocks has changed over the last 20 years.
- The Dot-com boom and financial crisis remind us that tech is not immune from a downturn
As the popularity of tech has increased in recent decades, acronyms like FAANG have been created to refer to the darlings of tech. Although the tech sector continues to reveal superior relative strength and it has outperformed the broader market, there have been time periods when investors have fallen out of love with tech. Here’s a look back at three pivotal points in Nasdaq Composite Index history that tell the story of our relationship with tech stocks.
Dot-com Boom and Bust
The NASDAQ Composite index surged in the late 1990s and then fell sharply as a result of the dot-com bubble. On July 17, 1995, the Nasdaq 100 index closed above the 1,000 mark for the first time. It reached 2,000 points by 1998, and then began to accelerate significantly . In March 2000, the index finally peaked at an intra-day high of 5,132. After its peak, the index plummeted to 3,227 in a little over a month and in the following 30 months fell 78 percent from its peak. In other words, the dot-com bubble had burst.
In October 2007, the Nasdaq hit 80-month highs, reaching an intra-day level of 2,861 on October 31, the highest point reached on the index since January 24, 2001.
The smell of a recession dropped the index into a bear market in early 2008, which was recognized on February 6 when the Nasdaq closed below the 2,300 level, about 20 percent below the recent highs. The failure of Lehman Brothers in the Fall of 2007 brought world financial markets into turmoil. The Nasdaq was no exception, experiencing record levels of volatility.
On September 29, 2008, the Nasdaq dropped nearly 200 points, the most since the Dot-com bubble burst, losing 9.14 percent (3rd largest ever) to fall beneath 2,000. In March 2009, the composite hit a six-year intra-day low of 1,265 before recovering due to the quantitative easing policy of the Federal Reserve.
Post Crisis – Bull Market
While the Global financial crisis of 2008–2009 was possibly coming to an end, the index climbed above 3,000 for only the second time in its history in 2012. On April 23, 2015, the Nasdaq finally set a new high for a daily close, though it was still just short of the all-time intraday high set in 2000. Two years later, it crossed 7,000 intraday, within reach of the inflation-adjusted high set in March 2000.
In January 2018, the Nasdaq closed at a record for the first time since the end of the Dot-com boom. In July 2019, the composite set a new record high as the index traded 8,016. We’ve since seen a pullback across all the major equity indexes as signs of a recession mount.
Tech gets the headlines, but especially at times of market uncertainty it’s important to remember that those headlines haven’t always been positive for investors.
The roller coaster ride of the Nasdaq 100 or tech sector has been a bumpy one, but the 103 names that make up the Nasdaq 100 Index continue to attract assets globally. Invest carefully and please wear your seat-belt.