"Have We Reached the Bottom Yet?"

Mania. It’s hard to recognize when you’re in it.

But that’s what the Covid-era buying frenzy was. A mania. You might even call it the second coming of the dot-com bubble. Investors bid up profitless tech companies to nonsensical valuations. IPO volumes went through the roof. And JPEG files branded as “non-fungible tokens” sold for millions of dollars.

This all culminated in a 108% rise in the stock market over 22 months. Now, after peaking at the start of the year, the market has dropped 13.3%.

And people keep asking me, “Have we reached the bottom yet?”

  • The first dot-com bubble provides a useful roadmap for answering that question.

As you might recall, the Nasdaq rose 320% from April 1997 to its peak in March 2000. Then it started tumbling. Over the next 18 months, the Nasdaq fell 72%, finally bottoming in September 2001.

This go-round, the Nasdaq peaked in December 2021. And it’s dropped 22% since. For this to be a 1:1 parallel, the Nasdaq would have to fall another 50% and take another year to bottom.