If only you could do it over again . . . two big anniversaries on Wall St. this week
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Shakespeare warned about the Ides of March. For the stock market, it’s the Extremes of March that have left deep scars on the collective psyche of modern investors.
This week brings two anniversaries of historic coulda-shoulda-woulda moments on Wall Street -- points at which raw emotion ruled for the worse, and only in retrospect did every investor realize that the right thing to have done was to have gone against the tide:
--- Tuesday marks the one-year anniversary of the market’s lows following the 2007-2008 credit calamity. After diving from September to late-November of 2008 as the global financial system reeled, stocks resumed their collapse in January and February of 2009 as the economy worsened and fears deepened that the Obama administration planned to nationalize a large swath of the banking system.
The Dow Jones industrial average bottomed at a 12-year low of 6,547 on March 9, down 54% from its all-time high of 14,164 reached in October 2007. As usually is the case at market bottoms, few investors at the time trusted that the selling had finally exhausted itself.
One year later, many investors still don’t trust that the worst is over. But the doubters can’t deny that they’ve left a huge amount of money on the table: The Dow now is at 10,566, a 61% rebound from its low.
--- Wednesday is the 10-year anniversary of the peak of the technology stock mania that began in the mid-1990s with the rise of the Internet. The Nasdaq composite index reached its all-time closing high of 5,048.62 on March 10, 2000.
By then, almost everyone on Wall Street had bought into the concept that the tech industry’s global growth potential was limitless. As for dot-com-related businesses, many starry-eyed investors believed that there were no bad start-up ideas -- just some that were less lucrative than others.
What followed, of course, was a stock market meltdown for the ages, as many segments of the tech industry collapsed in 2000, 2001 and 2002 in the face of falling demand and gross excess capacity.
By the time the Nasdaq bottomed at 1,114 in October 2002, it had lost 78% of its 2000 peak value. At 2,326 now, the index still is down 54% from its record high, though it’s up 83% from a year ago.
Given that the Nasdaq peak and last year’s bear-market low were just nine years apart, it’s conceivable that there’s at least one investor out there who made the exact wrong decision both times: buying on March 10, 2000, and selling on March 9, 2009.
But getting someone who was that incredibly unlucky to publicly admit it -- well, that’s another thing altogether.
-- Tom Petruno