No, This Isn’t a Repeat of the Dot-Com Bubble

Stocks are sky-high, but this isn’t 1999. Here’s why.

Nick Maggiulli
Marker
Published in
8 min readSep 22, 2020

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A generic illustration of stock market bar graphs and financial market data.
Image: MR.Cole_Photographer/Moment/Getty Images

When it comes to the stock market, there seems to be just one question on everyone’s mind lately: Is this another dot-com bubble in the making?

Whether it’s IPOs hitting 1999-like levels, retail investors flooding the markets, or the tech bubble bursting again, there’s no shortage of headlines suggesting that we are experiencing a dot-com déjà vu. And a periphery glance at current market conditions — culminating in last week’s largest software IPO debut of Snowflake — would seem to confirm the alarm bells of those who are pattern matching today’s sequence of events with those from the internet bubble craze.

Half a year into Covid-19, there has been an ongoing rally of tech stocks, rising equity valuations, and a recent surge in retail trading activity, leaving many investors wondering just how much higher stocks can climb. However, despite some similarities between today’s market and the market of the late 1990s, this is where the resemblance ends.

One big piece of evidence that suggests that we are not repeating the dot-com bubble is the much lower (yes, lower) growth rate of technology stocks compared to the late 1990s. For example, over the past five years the Nasdaq Composite has increased in value by 127%, which pales in comparison to the 456% growth in the Nasdaq during the heyday of the dot-com era:

One of the hallmarks of market bubbles is that no one can see them coming until after they burst. Otherwise, everyone would be in the predictions business — especially during the extraordinarily uncertain pandemic times we live in now. But with the benefit of hindsight, it’s possible to see how previous economic cycles compare to current ones.

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Nick Maggiulli
Marker

Financial Blogger at OfDollarsAndData.com. Full Disclosure: Not investment advice. See OfDollarsAndData.com/Terms for full disclaimer.