The Nasdaq Composite Index is now down 10% from its December peak
Tariffs and geopolitical tensions have sparked a sell-off, with high-flying tech stocks getting smacked.
On Friday, March 10, 2000, nearly 25 years ago to the day, the Nasdaq Composite — a growth-heavy index often synonymous with tech stocks — peaked at 5048.62 before slipping 2.8% in the following Monday’s trading.
At the time, investors had no idea what was to come, as that small release of pressure turned into a bump, which turned into a correction, which turned into a full-blown pop for the dot-com bubble that had turned an entire generation of web 1.0 entrepreneurs into paper millionaires. It took 15 years for the market to climb out of the crater it had eventually sunk into, with the Nasdaq Composite down 78% from its peak at its worst.
Though things are very different today from that fateful time at the turn of the millennium, the same Nasdaq index has once again entered correction territory — falling 10.4% since its December 16 peak, as concerns over tariffs, trade, and geopolitical tensions weighed on stocks this week. Broader indexes, like the S&P 500, which is down only 6.6% from its high, haven’t hit the correction milestone yet.
While the urge to be alarmist is strong, this is, of course, a fairly regular occurrence. Stocks can’t go up forever, even if we’d like them to, and a drop of 10% has happened dozens of times before. What’s more, unlike in 2000, many of the companies that have seen their share prices soar over the last 24 months have real business momentum. Just yesterday, Broadcom reported a blockbuster set of numbers, with profits more than quadrupling to $5.5 billion in Q1.
History suggests that if we do enter a prolonged downturn, tech stocks with stretched valuations could be in for a lot more pain. It goes without saying, however, that dot-com darlings like Pets.com, and even giants like Cisco, were never posting $5.5 billion of quarterly profits.
