The technology-heavy Nasdaq Composite gained more than 10% last month following a dismal year in 2022, with history showing that the stock-market index does well in the following 12 months — except in 2001, according to Bespoke Investment Group.
According to Dow Jones Market Data, the Nasdaq finished January with its best January performance since 2001, gaining 10.7%.
And according to FactSet statistics, this follows a 33.1% loss in 2022, including an 8.7% drop in December.
“After finishing an already poor year on a low tone, the Nasdaq roared into 2023 [by] rising 10.7% in January,” Bespoke stated in an emailed report Wednesday. “There have been 33 prior months where the Nasdaq has surged at least 10% since its founding in 1971.“
According to Bespoke, the number of occurrences shrinks to only 16 when narrowed to rallies of that magnitude following a 12-month period in which the index was down.
The Nasdaq’s performance tended to be positive over the next year in such circumstances, according to the business, except in 2001, “when there were four different [monthly increases of 10% or more] and the Nasdaq was worse one year later after all four of them.“
For example, the Nasdaq rose 12.2% in January 2001 after falling 39.3% in the previous year, according to the data below.
Over the next year, the index fell 30.2%.
“With the current era regularly drawing similarities to the dot-com bubble bursting from 2000 to 2002, it’s not especially reassuring to observe that there were multiple [10%-plus] monthly advances in 2001, all of which were followed by eventual falls,” Bespoke added.
The stock market in the United States plummeted last year as the Federal Reserve quickly boosted its benchmark interest rate in an effort to contain inflation.
Technology and growth stocks were hammered especially hard.
The Nasdaq is “still only 1% higher than where it was at the end of November,” Bespoke noted in the analysis, which was distributed before the market’s opening on Wednesday. “There is also a sizable percentage of investors who say they will not be duped again.“
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