The Historical Context
After a period of economic stability, the Nasdaq Composite surprised investors by closing down over 1% during the first two trading days of 2024, a rare occurrence not seen since 2005, according to Bespoke Investment Group.
In a twist of market fate, many of 2023’s winners, known as the “Magnificent Seven” mega-cap tech stocks, including Alphabet (Google), Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla, have seen a sudden drop as investors seem to be cashing in on last year’s gains.
Is the recent sell-off merely a routine correction or a harbinger of a tumultuous year ahead?
Insights from History
The Nasdaq has only witnessed a similar decline on the first two trading days on two previous occasions: 1980 and 2005. 1980 saw the slow start ultimately transform into a staggering 34% increase by the end of the year. While 2005 ended on a relatively flat note, it still overturned the early setback. This historical precedence offers investors a glimmer of hope amidst recent uncertainties.
Present Woes
According to Bespoke, several leaders from 2023 are confronting retractions at the onset of 2024. Apple Inc AAPL is currently down by nearly 3% since the commencement of the year. Similarly, tech behemoths such as Microsoft Corp MSFT and NVIDIA Corp NVDA have also stumbled in their initial strides.
Market Outlook
While January typically ranks as the sixth-best month for S&P 500 returns since 1950, Carson Group’s Ryan Detrick reminds investors that mild pullbacks at the start of the year, like the recent one witnessed in the S&P 500, tend to occur multiple times annually. Hence, the current downturn may not be cause for immediate alarm, at least not yet.
Detrick’s insight, coupled with the historical data, could offer investors a glimpse of hope amidst the current ambiguity.
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