But a whole generation of investors has never been through a Nasdaq-bubble unwind, and they’re shocked.
I just dug out my “Dow 20,000” hat, but I might not need it for a while because nothing goes to hell in a straight line. And I still have my “Dow 10,000” hat somewhere just in case, though I doubt I’ll need to go look for it anytime soon for the reasons I’ll explain in a moment.
I have to admit, this was a beauty of a Santa rally. We were promised a Santa rally by the buy-buy-buy hype organs on Wall Street, so here we go with our Santa rally:
The Dow dropped 6.9% this week, to 22,445, and is down 9.2% for the year. It’s down 16.3% from its all-time peak in September. It’s only about 11% away from my “Dow 20,000” hat. The last time we saw 20,000 on the way up was in January 2017. But rolling back 21 months of gains in the stock market — from September 2018 back to January 2017 — is nothing. The big deal is how much the Dow has surged over those 21 months from 20,000 to the peak in September: 35%.
Over the same period, the economy grew maybe 5%. So going back to 20,000 will just surgically remove the very tippy top off the bubble.
The S&P 500 Index dropped 7.1% this week and is down 9.6% year to date, down 17.5% from the peak in September, and back where it had first been on June 1, 2017.
The chart is not exactly pretty, with that nearly straight red line south, but let me assure you again: Nothing goes to hell in a straight line, and in a moment, I’ll get to why this one won’t either.
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