Are We In Danger Of Another Tech Stock Bubble?

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Louis Navellier

By Gary Alexander

Most investors fear a replay of some past portfolio haircut – specifically the financial crisis of 2008 or the tech stock bubble of the late 1990s, which memorably popped in 2000. In just 31 months, the tech-heavy NASDAQ index fell by 78%, from a peak of 5048 on March 10, 2000 to just 1114 on October 9, 2002.

So that makes the tech stock crash of 2000-02 the worst sector-specific massacre of our lifetimes, right?

Nope. According to Professor Jeremy Siegel’s “Stocks for the Long Run” (Fifth Edition, 2014, pages 43-44), the financial sector of the S&P 500 fell 84% from its peak in May 2007 to its trough in March 2009. That’s slightly worse than the 82% loss in the S&P 500 tech sector from its peak in 2000 to its trough in 2002. What’s even more devastating, the decline in financial stocks in 2007-09 wiped out the previous 17 years of gains – since 1990 – while the tech crash of 2000-02 only wiped out five years of previous gains.

Peak to trough, Bank of America lost 94.5 percent of the market value of its equity. Citibank lost 98.3 percent, and AIG lost an astounding 99.5 percent. The equity holders of Lehman Brothers, Washington Mutual and a large number of smaller financial institutions lost everything…. Barclays fell 93 percent, BNP Paribas 79 percent, HSBC 75 percent and UBS 99 percent. The Royal Bank of Scotland, which needed a loan from the Bank of England to survive, fell 99 percent.

- Jeremy Siegel, “Stocks for the Long Run” (5th edition, 2014, page 44)

The Royal Bank of Scotland (RBS) was formed in 1727, the year King George II was crowned. The historical great-grandfather of Citibank (C) was founded 205 years ago on June 16, 1812. Union

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Navellier & Associates was founded by Louis Navellier in 1987 and since then has guided thousands of investors by applying our disciplined, quantitative investment process to a broad range of equity products. Every day, investors hire Navellier to manage their assets in a private account, mutual fund, or defensive portfolio. For over 25 years, we’ve been zeroing in on opportunities for long-term growth. We employ a veteran team of investment and client service professionals who deliver exceptional, personal service and industry-leading information to our clients. _________________________________ Important Disclosures that Accompany Navellier & Associates Articles: *Navellier may hold this security in one or more investment strategies offered to its clients. None of the stock information, data, and company information presented herein constitutes a recommendation by Navellier or a solicitation of any offer to buy or sell any securities. Any specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. The reader should not assume that investments in the securities identified and discussed were or will be profitable. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. Individual stocks presented may not be suitable for you. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. One cannot invest directly in an index. Results presented include the reinvestment of all dividends and other earnings. Graphs are for illustrative and discussion purposes only. Although information has been obtained from and is based upon sources Navellier believes to be reliable, we do not guarantee its accuracy and the information may be incomplete or condensed. All opinions and estimates constitute Navellier's judgment as of the date of the report and are subject to change without notice. This report is for informational purposes and is not to be construed as an offer to buy or sell any financial instruments and should not be relied upon as the sole factor in an investment making decision. Any decision to purchase securities mentioned in this research must take into account existing public information on such security or any registered prospectus. Past performance is no indication of future results. FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any federal tax advice, the presentation is not intended or written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax penalties. Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.

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