by Gary Alexander

April 4, 2023

The first quarter is in the books. January looked like a bonanza, but February brought gloom – through the Ides of March. Then, late March delivered a sizzling rally, and all the major indexes turned positive.

Stock Market Index  March Results  First Quarter 
NASDAQ 100 +9.49% +20.71%
S&P 500 +3.71% +7.46%
Russell 2000  -4.85% +2.70%
Dow Industrials +2.13% +0.91%
Source: Bespoke Investment Group

Bespoke Investment Group also tells us that the opening quarter of 2023 marked the 21st quarter in the Nasdaq 100’s history (since 1985) in which the index was up at least 15%. Of the 20 prior quarters in which the Nasdaq 100 rose 15% or more, they say its median performance in the following quarter was +6.1%, vs. 4.0% average gains in all quarters since 1985 – or about a 52% better-than-average boost.

Even though Bespoke says the S&P 500 is still in a bear market (since it has not yet rallied 20% off its lows), NASDAQ began its latest bull market last December 28. In their study of 16 past NASDAQ 100 bull markets, Bespoke tells us that the median gain was 58.7% over a median span of 262 calendar days. (As of March 31, the NASDAQ 100 is up 22% in just 93 days, so we may have some room yet to run.)

The news gets better. Some bull markets are very long – the longest and strongest NASDAQ bull market ran nearly 10 years (3,569 days) from late 2008 to 2018, gaining 639%. With several such short and long outliers along the way, the arithmetical average bull market runs 2+years (771 days), gaining 158.6%.

Now, let me turn to the biggest quarterly gain in 2023, the NASDAQ 100, the shorthand name for the 100 biggest non-financial stocks on NASDAQ, generally traded as ‘the Q’s’ (QQQ), which I sometimes think of with fear and trembling by using the French pronunciation, J’accuse. That’s because I recall the worst market crash ever to fall in April – once the market’s best month – the NASDAQ collapse of April 2000.

The 30% Crash of April 2000

Caution: Nothing you are about to read should keep you from investing in solid NASDAQ securities, especially in April, and especially in a pre-election year. According to Bespoke Investment Group, the median April in Year 3 of the last 19 postwar election cycles is +3.8%. The only exception since 1947 was 1987, and it was only off 1.15%. The rest of Year 3 was up 16 of 19 times by an average +8.57%.

March and April are great months for stocks, as I pointed out February 28, 2023 (“Good News: Two Great Market Months Start Tomorrow”). The year 2000 was no exception, even though that was when the pin decisively popped the dot-com bubble. The bulk of stocks did just fine. The major blue-chip indexes kept rising. March and April 2000 rose 6% in the Dow Jones Industrials, and the S&P 500 did even better, up 6.3% in March and April of 2000. However, this column concerns our problem child, NASDAQ, which FELL 17.8% in those same two months, including a near-30% drop in the first half of April 2000.

The Rise and Fall of the Nasdaq Chart

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

NASDAQ surpassed 5,000 on two days in early March, and it traded above 5,000 intraday on Monday, March 27, but then its collapse started like a snowball rolling downhill, fueling an avalanche. Monday, April 3 saw a -7.64% haircut (while the Dow rose 300 points), but the next week was the week from hell:

On Monday, April 10, 2000, NASDAQ fell 258.25 points (-5.8%), while the Dow Jones index actually rose by 75 points. It was the start of the worst week in the history of the NASDAQ index.

In the week of April 10-14, 2000, NASDAQ fell 1,125 points (-25%) to 3321.29, in five giant steps:

The Week from Hell in NADSAQ, April 10-14, 2000
Monday, April 10 -258.25 (-5.81%) to 4188.20
Tuesday, April 11 -132.30 (-3.16%) to 4057.90
Wednesday, April 12 -286.27 (-7.06%) to 3769.63
Thursday, April 13 -92.85 (-2.46%) to 3676.78
Friday, April 14 -355.49 (-9.67%) to 3321.29
(Data source: The Almanac Investor)

Investors – And Pill-Popping Batsmen – Were Swinging for the Fences

The dot-com bubble of 1998-99 coincided with the proliferation of the steroid-fueled home run hitters – Mark McGwire, Sammy Sosa, Barry Bonds, and more. I was working in Potomac, Maryland then and would go see some Baltimore Orioles games. A light-hitting Oriole outfielder, Brady Anderson, hit 12, 13, and 16 home runs a year from 1993 to 1995, but he hit 50 dingers in 1996. He then reverted to just 18 a year in 1997 and 1998. What made him Superman in 1996?!

Swinging for the Fences Baseball Correlation Chart

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

Mark McGwire hit just 24, 34, and 24 homers in 1995 through 1997, then, all of a sudden, he broke the record (61) to bits when he hit 70 round-trippers in 1998. Sammy Sosa nearly matched him, same year, hitting 66, after hitting just 36 in 1997. This was like NASDAQ stocks on steroids vs. the drug-free Dow.

To this day, Sosa, McGwire, Bonds (and some others I could name) are not in the Baseball Hall of Fame, although they are among the top 10 home run hitters of all time, because the voters think they cheated. I’m not saying big NASDAQ stocks have phony earnings, but I don’t trust sudden fast growth. I’d rather see long-term sustained growth of companies that make products average Americans trust and buy often.

Also, I don’t like indexing. It seems Un-American to put the weak and strong in a package, lumping 100 stocks into a basket and tell investors, “buy all 100, or none.” With the NASDAQ 100 (actually 101), the top two stocks account for 25% of the QQQ’s assets. I don’t like cap-weighting as a strategy, either.

At Navellier, we prefer to be selective. Louis Navellier says this is a 15% market – meaning that only 15 out of 100 stocks are worth looking at, much less owning. Now he says we may be near an 18% market, but there is no way I want to own all 101 stocks in the trendy NASDAQ 100. It’s too risky for my blood. The steroids in some of these stocks may help me hit a lot of home runs, but I will also strike out a lot.

For instance, NASDAQ soared (+312.57%) from August 31, 1998, to March 27, 2000, What came next?

For the rest of 2000, NASDAQ lost 50% and it lost 78% by October 2002. I don’t think that will happen during this pre-election year. We are nowhere near a dot-com bubble, but I’ll still steer clear of the Q’s.

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

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
Temporary Good News on the Banking Front

Sector Spotlight by Jason Bodner
Are We on The Edge of a Market Precipice?

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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