The stock market had a very bad day yesterday, as well as a very bad month...and, oh yeah, a historically bad start to the year. The S&P 500 was down 3.63% on the day, 8.8% on the month and 13.3% YTD, the worst 4-month start to a year since 1939 (-17.3%). But the S&P 500's tumble was not nearly as bad as that of the tech-heavy NASDAQ Composite. The Composite was down 13.3% in April, its worst month since October 2008 (remember Lehman?) and 21.2% YTD, its worst start to a year ever. Below is a chart of the Jan-Apr returns of the NASDAQ Composite since 1999:
Jan-Apr 2022's NASDAQ drawdown is 50% worse than the Composite's 2001 drop over the same months...and that was during the middle of "dot.com bust." Could this be the start of dotcom crash 2.0? Until this earning season, the resilience of Big Tech (Google, Microsoft, Apple, Amazon, etc.) had been supporting the broader indices. But even by early March the damage below the surface was extensive, as this chart from the SocGen and the FT shows, with over 60% of the NASDAQ's underlying, mostly technology, stocks down at least 25% and 40% of stocks down more than 50%.
As the FT's Robbin Wigglesworth wrote: "For companies that are sustained more by dreams than cash flows, 2022 has been a nightmare. For those that scoffed at the last two years of excesses in markets, it has felt like sweet vindication." And that was in March.
Well now, Google has missed, Amazon incurred its first quarterly loss since 2006, and Apple has warned of weaker earnings ahead. We're sure the MAAMAs will be okay, perhaps after giving back most if not all of the pandemic gains. But for many unicorns this could be a replay of 2000? The chart below shows how the NASDAQ has behaved after reaching their 2000 and 2021 peaks. After 110 trading days (~5 months) we are in the same position.
Source: Yahoo Finance, Mantabye
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