This morning's WSJ has a cover story comparing the declines in financial shares to the declines of tech stocks during the Internet bubble. We find that comparison hard to make at this point.
Since its peak last year, the S&P 500 Financial sector is down 45%. While that's a large decline, it's nothing compared to the 77% decline that the Nasdaq saw from its high in 2000 to its low in 2002. For the Financials to be 77% below their record highs, the sector would have to fall another 60% from current levels!
And the rally in Tech stocks completely drawfs the rally that Financials had. In the first chart below, we highlight the percent change in the Nasdaq and the S&P 500 Financial sector since 1990. As shown, the bubble and its subsequent burst in the Nasdaq stands out like a soar thumb. In the bottom chart, we highlight the percent change in the Nasdaq from its low made in June 1994 to its low made in October 2002. We also include the Financial sector from its low made in October 2002 to its low made yesterday. While it's been a tough ride for Financials recently, the Tech bubble was more than double the fun and then double the pain.
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