Here we go again (?)

Stocks have been on fire this year.

YTD, the S&P 500 is up 26.9%.

What's interesting is that the S&P is on pace to close up 20% or higher for the second year in a row. (2023 was up 24.2%.)

That's a feat rarely seen in the past.

I have seen others state the same. But they do so as a cautionary tale and tie it to the dot-com bubble.

That's all well and fine.

But I see it a bit differently.

The dot-com bubble 'burst' in 2000 when the S&P dropped by -10.1% for the year. (That was also Y2K, which caused plenty of panic leading up to it, but came and went pretty much without a hiccup.)

The point is, the dot-com bubble was preceded by the dot-com (technology) boom.

In 1995 the S&P was up 34.1%.

In 1996 it was up 20.3%.

That was the first time it was up 20% or more for two years in a row since 1954-55.

So, what happened in 1997? It was up another 31.0%.

1998? Up another 26.7%.

And in 1999, it was up 19.5%.

A spectacular rally that lasted 5 long, glorious years.

Yes, the dot-com bubble arrived in 2000. But not before people got rich over the preceding 5 years with a 220% increase in the index, while plenty of individual stocks were up several hundred percent to several thousand percent.

And I'm here to say that I believe we could possibly see the same thing again now. Maybe 5 years or more of boom times – for similar reasons, and some unique to the present day.

***

Possibly.

-- Kevin Matras, Weekend Wisdom, 12/13/24