The tech-laden Nasdaq Composite is up more than 10% in the past month after a down year in 2022, with history showing the stock market index tends to perform well in the next 12 months after such a downturn. scenario, except in 2001, Bespoke Investment Group warned.
The Nasdaq just wrapped up its best January performance since 2001 with a 10.7% gain, according to Dow Jones Market Data. This is after plunging 33.1% in 2022, including an 8.7% drop in December, FactSet data shows.
“After ending an already down year on a negative note, the Nasdaq entered 2023 with a 10.7% rally in January,” Bespoke said in an emailed report Wednesday. “Since the Nasdaq’s inception in 1971, there have been 33 previous months where it’s up at least 10%.”
But the number of occurrences drops to just 16 when trimmed to rallies of that magnitude after a 12-month period where the index was down, according to Bespoke. In such cases, the firm has found that the Nasdaq’s performance tends to be positive over the next year, except in 2001, “when there were four different monthly gains above 10% and the Nasdaq fell a year lower.” after all four”.
For example, the chart below shows that the Nasdaq jumped 12.2% in January 2001, after falling 39.3% in the previous 12 months. The index tumbled 30.2% over the next year.
“With the current period often drawing comparisons to the bursting of the dot-com bubble from 2000 to 2002, it is not particularly comforting to see that in 2001 there were multiple monthly gains of more than 10%, and all of these were followed by eventual declines. .” He said custom made.
The US stock market sank last year as the Federal Reserve rapidly raised its key interest rate in an effort to curb high inflation. Technology and growth stocks were particularly hard hit.
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Fed Chairman Jerome Powell will host a news conference on Wednesday afternoon at 2:30 p.m. Eastern time, after the U.S. central bank concludes its two-day policy meeting. The market expects the Fed to announce it is raising its key rate by a quarter of a percentage point to a range of 4.5% to 4.75%, potentially slowing the pace of rate hikes amid signals of easing inflation. The Fed’s statement on its decision is expected at 2:00 p.m. New York time.
The Nasdaq is “still just 1% higher than where it was at the end of November, but the strong start to the year has emboldened many bulls,” Bespoke wrote in the report, emailed ahead of the open. market on Wednesday. “There’s also more than a small minority of investors who say they won’t be fooled again.”
The US stock market opened lower on Wednesday. The Dow Jones Industrial Average DJIA,
was down 0.9% around midday, while the S&P 500 SPX,
fell 0.5% and the Nasdaq COMP,
lost 0.3%, according to FactSet data, at the last check.
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