As the famous saying goes, “History never repeats itself, but it does often rhyme,” and recently, the Nasdaq Composite index (NASX) chart has been demonstrating eerily similar movements as around 20 years ago, when the dot-com bubble imploded.
Indeed, the NASX chart shared by the data analytics platform Barchart shows that the index’s current chart patterns mimic those from the turn of the century, specifically the two bottoms, followed by a top, another bottom, another top, and a beginning of a decline, as shown in an X post published on October 26.
As the X user Michael Burry Stock Tracker, who keeps track of Michael Burry’s stock portfolio, highlighted when reposting the chart, the comparison of the dot-com bust and today’s stock market was “looking a little spooky,” according to the post shared on October 26.
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What happened in early 2000s
As a reminder, the dot-com bubble was a stock market bubble fueled by highly speculative investments in internet-based businesses during the bull market of 1995 – 2000 that saw a dramatic growth in the value of equity markets, particularly the technology-dominated Nasdaq index.
However, in the late 2000s, investors realized that many of these companies’ business models were not viable, which led to a two-year-long bear market that saw the Nasdaq index plunge over 75%, the majority of dot-com stocks go bust, and trillions of dollars in investment capital disappear.
Echoes of the past
What followed was a period of 15 years before the Nasdaq stock index recovered and retrieved its peak. Considering that the same pattern has been unraveling for the past several years, a question arises as to whether another massive stock market crash could ensue, just like the dot-com bubble.
Earlier this year, legendary investor Michael Burry, a hedge fund manager known as “The Big Short,” who has built a reputation for making predictions about the financial markets, warned about the state of the banking and financial world at the time, pointing out that they were mirroring the dot-com and housing crashes from 2000 and 2008.
At the same time, the chief market strategist at InTheMoneyStocks.com, Gareth Soloway, earlier this year compared the dot-com bubble, not with the stock market or banking but instead with today’s cryptocurrency market, arguing that it could go through the same kind of washout that dot-com companies had gone through at the time.
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