by Gary Alexander

February 27, 2024

Something remarkable happened last Thursday, on what we used to celebrate as Washington’s Birthday. As the day dawned in Tokyo, the Nikkei stock index rose 2.2% to close above 39,000 (at 39,098.68) for the first time in over 34 years, since the last trading day in 1989. As the sun moved across the Silk Road to Europe, the comprehensive Stoxx 600 index there also set a new record high of 495.10. Then, as the global bull market crossed the Atlantic, both the S&P 500 and Dow Jones Industrials also hit new highs.

Pundits gave credit to red-hot “AI” stocks, but I give major billing to time and inflation. After 34 years, a revival of easy money at Japan’s central bank was bound to push Tokyo’s stocks to long-delayed highs.

Let’s take a look at that 34-year gap – what caused it, plus some similar long, dry spells in America:


Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

I first wrote about the Coming Japanese Colossus in 1968, just out of college, in a series of three articles for a major magazine, at a time when few thought Japan made much more than tiny transistor radios and small motor bikes. The world woke up to Japanese imports in the 1970s. I well recall the Japanese stock market soaring in the 1980s, when pundits proclaimed that Japan would become dai-ichi (Number One) in global GDP by 2000 (just as they say China could do now, by 2030). Some said, “One square mile of Tokyo real estate is worth more than all the land in California.” At the time, I echoed the words of the boy in Hans Christian Anderson’s “The Emperor’s New Clothes” by saying, “No, it isn’t!” Later, when Dr. Ravi Batra wrote a book about the coming “Great Depression of 1990,” a compatriot of mine said, “That’s a good prediction, but the wrong continent.” The 1990 Depression happened in Japan, not in the U.S.

Three Similar Crashes in U.S. Stock Market History

Something similar happened – with equal pride coming before a similar steep fall – in the United States, with a 25-year dry spell from 1929 to 1954. On October 16, 1929, a famed Yale economist Irving Fisher wrote in The New York Times that, “Stock prices have reached what looks like a permanently high plateau,” but just eight days later, on October 24th, a series of four “Black” days began with Black Thursday, and then the rout was on. The Dow Jones Industrial Average did not reach its September 1929 peak for over 25 years, until late 1954. Unless you had the courage to buy low, you sat on “dead money.”

DJIA Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

In addition, here are a pair of more recent U.S. market droughts in an age of higher inflation:

One is tied to tomorrow’s date: On Friday, February 28, 1964, the Dow Jones Industrial index crossed 800 for the first time, at 800.14. It was a time of euphoria, of sorts. The Beatles’ invasion of America was in full force, touring the nation, with three appearances on the Ed Sullivan show. The Dow actually kept rising to nearly 1,000 (995) in early 1966, but then it stalled for 16 years before crossing 1,000 for good.

On another February 28 (in 1978), the Dow closed at 742,12, so it was down 58 points (-7%) in 14 years, but those were years of super-high inflation, so the “real” decline was over 50%. If you measure from the 1960s peak (995 in February 1966) to the trough (777 in August, 1982), the decline is 22%, but factoring in CPI inflation, which more than tripled, the actual “real” decline in the Dow was -74% in 16.5 years.

Here’s a similar example, using a different starting date, two years later, May 3, 1968. The chartist, Dan Amerman, comes to a similar conclusion, although he started from a lower Dow level, two years later:

Market Loss Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

And then we have the Y2K NASDAQ crash, which has a faint resemblance to the “AI” rush going on now. The Internet was a real deal, but the dot-com bubble was a premature rush to riches, madly bidding up companies with no earnings and no business plan. NASDAQ rose over 250% in the 17 months from October 1998 to March 2000. After the Dow peaked in January 2000, the frothy NASDAQ gained 19.2% in February 2000, while the Dow fell 7.4%, an unprecedented divergence between two major indexes.

April 2000 was the reverse, with the Dow and S&P suffering minor damage, while NASDAQ collapsed, eventually looking like the Tokyo market, in a by-now all-too-familiar chart of bubble-top-then-drop.

FRED Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

This brings us back to 2024 and the new record highs across the board, led by a very few “AI”-related stocks. It’s not Y2K all over again, although there are some similarities. Today’s major divide is between the three major indexes and the Russell 2000 – even though one “small” AI stock in the Russell 2000 has soared over 200% so far this year and has kept the Russell 2000 near zero for the year, but it’s still down:

Index Table 1

Even though markets are up strongly in the last four months, they were down in the dumps the previous three months, so we’re not at (or near) any “blow off” stage during this market mania over AI stocks.

Still, it’s important to remember that any market can get ahead of itself. Even if AI turns out to be “bigger than the Internet” (which I doubt), it will take time for any profitable AI business applications to hit the bottom line, just as it took time for businesses to figure out how to monetize the Internet around Y2K.

And don’t forget all those past market fads, like dot-com stocks, FTX, or cannabis stocks. Buyer-beware.

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

A Look Ahead by Louis Navellier
Inside NVidia’s Stunning Report, and its Impact

Income Mail by Bryan Perry
What Could Stop the Market’s Mojo?

Growth Mail by Gary Alexander
Are We in Market Bubble Territory Yet?

Global Mail by Ivan Martchev
The Broad Market is Not Extended at All

Sector Spotlight by Jason Bodner
Is the Market a Short-Term Casino, or a Long-Term Sure Thing?

View Full Archive
Read Past Issues Here

About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

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