Twenty-five years ago, the fun of the Dot Com boom came to an end. Roughly beginning in December 1994 with the release of the first internet browser, Netscape, the Nasdaq would go on to rally just under 600% through the closing high set on March 10, 2000. After that high, the index declined with persistent losses as it didn't find a bottom until over two and a half years later in October 2002. By then, the index was down 77.8% from its high, and it wasn't until 2015 that the Nasdaq eventually reclaimed those prior highs. Fast forward to today, even though the Nasdaq has once again pulled back from its most recent highs, the index is now up 250% since that Dot Com peak and is up almost 1,500% since the 2002 low.

A quarter century later, the Nasdaq is once again in the midst of a new technical revolution with the emergence of AI. Additionally, while on March 10, 2000, the Nasdaq hadn't quite started to roll over, today it is in a significant drawdown having fallen 13% from the December 16 high.  In the chart below, we show the drawdowns in the Nasdaq in the year after the 2000 high versus the current drawdown so far since the December peak.  As shown, the pullback off of the Dot Com high was much more rapid that what has been seen lately.  For the comparable number of trading days, the Nasdaq was already closing in on a 40% decline in 2000 versus only a 13% drop currently.  Additionally, this latest drop has seen the Nasdaq actually trade sideways for about a month before things really started to fall off a cliff in the past couple of weeks.

While the move off of the recent high doesn't exactly line up with the Dot Com era, using a different starting point shows a much greater correlation. Below we show the performance of the Nasdaq in the three and five years following the releases of Netscape and ChatGPT.  As shown, the two lines have tracked one another remarkably well including this latest pullback.

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