The US stock market is experiencing the worst start to a year in five decades. Technology stocks, long a favourite of investors, are collapsing. And yet investors don’t seem bothered. I count five bear or near-bear markets in my adult lifetime, and I don’t recall investors ever being this sanguine about a declining market.
But there may be another, more concerning, explanation. Bear markets have become ever shorter over the past two decades, which may be giving investors the mistaken impression that stock market selloffs are brief, if uncomfortable, affairs.P 500 two and a half excruciating years to reach a bottom during the dot-com bust. The next downturn during the financial crisis lasted about 18 months from peak to trough. Then came two near-bear markets, a decline of 19.
It was a crash in three acts. The market peaked in March 2000, and tech stocks were the first casualty. The Nasdaq Composite Index declined 15 per cent over the next six months while the broader market was flat. The first sign of contagion came in September.P 500 dropped 27 per cent while the Nasdaq tumbled an additional 61 per cent. By April 2001, it looked as if the worst was over given the severity of the Nasdaq’s decline and that the market had turned higher.