Tech-Heavy Nasdaq 100 Surges, Evoking Memories of Dot-Com Bubble

Tech-Heavy Nasdaq 100 Surges, Evoking Memories of Dot-Com Bubble

Nasdaq 100 Soars 3%, Recalling Dot-Com Era Fears. History and seasonal weakness may lead to a pullback in U.S. stocks over the next few weeks, say Bespoke analysts


The tech-driven Nasdaq 100 index soared over 3% on Thursday, reaching an all-time closing high for the first time since March 2000. This impressive feat inevitably brings back memories of the dot-com era, a period marked by rapid growth and a subsequent bubble burst in the early 2000s.

"March 2000 is undoubtedly a worrisome time for investors to consider," remarked Bespoke Investment Group analysts in a client note obtained by MarketWatch. They further elaborated that while the specific scenario of the Nasdaq 100 exceeding 3% and reaching an all-time high hasn't occurred since March 2000, there were 32 similar instances throughout the 1990s leading up to the dot-com bubble peak.

The S&P 500 also mirrored the Nasdaq 100's performance, experiencing its first daily gain of at least 2% and closing at a record high since March 2000, according to Bespoke's data. The chart provided by Bespoke highlights these 21 instances since 1952 and their subsequent market performance.

"It's important to note that while the market initially experienced volatility in the following days, weeks, and months, the index managed to average a gain of roughly 2% over the next three months," Bespoke explained.

The U.S. stock market has been on a tear since hitting its bottom in October. Large-cap technology stocks continue to lead the charge, fueled by strong quarterly results showcasing an AI boom and a thriving economy. Meanwhile, investors grapple with the uncertainty of the Federal Reserve's potential interest rate cut later this year.

On Thursday, all three major stock indexes skyrocketed after a stellar revenue forecast from AI leader Nvidia Corp., which propelled the company to record the biggest one-day market capitalization gain for any U.S. company. Both the Dow Jones Industrial Average and the S&P 500 closed at record highs, while the Nasdaq Composite narrowly missed its own record close since 2021, based on FactSet data.

Market observers have been engaged in a continuous debate, questioning whether the recent surge in the "Magnificent Seven" tech stocks mirrors the dot-com bubble of 1999. Similar to that era, the current market is characterized by a surge in technology-driven hype. However, unlike the dot-com bubble, which burst in 2000 leading to a recession the following year, the analysts at Bespoke refrain from drawing a direct parallel between the two periods. Nevertheless, they highlight the historical pattern and the seasonal trend of March historically being "one of the weakest periods of the year," suggesting that the U.S. stock market might undergo a pullback in the coming weeks.

The week culminated with U.S. stocks closing mostly higher on Friday, with the Nasdaq Composite fluctuating between gains and losses. Nonetheless, both the S&P 500 and the Dow industrials remained on track to close at record highs and achieve their highest weekly gains of the year, as per FactSet data.

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