The Great Tech Bubble: 10 Years Later
Article from: Risks & Rewards August 2009 – Issue 54 THE GREAT TECH BUBBLE: 10 YEARS LATER By Steve Scoles n December of 1999, a Gallup survey showed that investors 1987, the Dow Jones collapsed 23 percent in a single day. expected to earn, on average, a 19 percent annual return Many people saw this crash as a harbinger of further massive I on stocks over the next 10 years. So far, stock investors declines similar to the Great Crash of 1929. have not done quite as well as expected. From December 1, 1999 to May 1, 2009, the S&P 500, assuming reinvestment of However, a funny dividends, has actually given investors an annualized return of thing then happened. Nasdaq Composite Index 1991-2002 Nasdaq Composite Index 1991-2002 negative 3 percent. Instead of the market going down, it gradu- 6,000 Putting that disparity of expectations and achievement into dol- ally went up. By the lar terms, for $100,000 invested, instead of an expected value early ‘90s, the mar- 5,000 of $570,000, an investor would have $74,000 – only about one- kets were making new eighth of what they expected. highs. The great “les- 4,000 son” of the ’87 crash 3,000 The epitome of the high investor expectations of late 1999, was whatever decline was the Great Tech Bubble. While the general market had in the stock market 2,000 an incredible run with the S&P 500 increasing by a factor of happens, no matter four in the ‘90s, the tech-laden NASDAQ composite index how mysterious, it’s 1,000 increased 16-fold from 1991 until the time of its peak in March a great buying oppor- 0 of 2000.
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