NASDAQ: Then and Now

The Tech sector has had a great dozen years, propelled by ultra-low interest rates and investors' growing appetite for risk. The NASDAQ Composite (QQQQ) has thrived in the anemic post-GFC economic environment, gaining nearly 21% per year since 2009. However, inflation is now a real threat to the economy, which means potentially tighter monetary conditions in the near future. Many Tech stocks, with expected profits far into the future, are long duration assets that are particularly sensitive to interest rate movements, akin to bonds. Since hitting a peak in mid-November, the QQQQ has fallen over 14%. But that's the whole index; underneath some erstwhile high-flying themes are getting hit harder. Cybersecurity stocks (represented by the HACK ETF) are down over 19%, software/ SaaS companies (SKYY ETF) are down about 25%, and worst of all, fintech stocks (FINX ETF) are down over 33%.  

Source: Yahoo Finance, Mantabye

When the "dotcom" bubble burst in 2000, the NASDAQ ultimately fell 80% over more than 2 years. We are nowhere near that, but how does the current pace of Tech decline compare to 2000? Much better, (for now) as shown below.

Source: Yahoo Finance, Mantabye

That's not surprising, given that today AAPL, MSFT, GOOG, AMZN, TSLA, and FB make up 42% of the QQQQ (as of 12/31/2021). With exception of Tesla, the other five companies are among the most profitable in the world. What is comparable to the 2000 NASDAQ's rate of fall is the drawdown in Bitcoin, which has fallen ~40% in almost as many (business) days. Makes sense.