We continue to hear commentary that suggests certain parts of the market look and feel a lot like the tech bubble in the late 90’s. Many people point to soaring stock prices, high valuations, large Initial Public Offerings (IPO’s), and of course the fact that so much of it is tied to technology companies. Our research partners at The Leuthold Group posted the following note recently.
Tech Mania 2.0 Doesn’t Quite Measure Up
In the 24 months leading up to its early-September peak, the S&P 500 Technology sector gained 68%. By comparison, the two-year S&P 500 Technology gain going into its March-2000 peak was 203%. The S&P SmallCap 600 Technology Index doubled in the 23 months leading into the early-2000 top versus the two-year gain of just 6% at its 2020-summer peak.
That was a mouthful. In plain English, the recent performance of tech stocks has vastly underperformed relative to the run up two decades ago. As investors we are constantly comparing current events with the past to try to gain an understanding of the markets. As humans, we are inclined to make up our minds about something and find data that supports our conclusion. Many folks have made up their mind that this environment is just like the Tech Bubble in 1999-2000. There are similarities, no doubt. But some of the data is telling a different story.