On the first day of the last month in 2008, NASDAQ recorded it’s 10th worst percentage loss since it was launched in 1971. It was a bit heartbreaking to see technology stocks go from tops to under, as the index hit it’s lowest level since October of that same year.
Although the stock exchange market could be volatile sometimes, a major fall or loss is generally seen as an indication of a bear market. You may not hear any news from the affected companies but their stocks keep on falling (or rising).
The changes in interest by consumers majorly affects the value of stocks. For example, since the advent of smartphones, manufacturers of old model telephones will have their users drifting away and purchasing better upgrades. This affects their revenue and eventually the worth of their shares. At a certain time, Microsoft had a drop in shares when more people started buying more of laptops, phones and tablets instead of the traditional desktop computers. This started affecting their revenue till they decided to switch from the licenced software to cloud based subscription Softwares. In 2000, their shares fell $4.50 to $79.38.
From the end of 1999 till about mid 2000, the NASDAQ 100 (which indexes large companies) recorded Bed Bath and Beyond as one of its worst performers. This same retail giant later became one of its best performers afterwards. On the other hand, one of best performers in that same year -Network Appliance – lost up to half of its value around the tail end of the year. This manufacturer of computer servers has not really picked up ever since.
The Worst Days of Percentage Losses in the NASDAQ
From 1971 till date, there has been just about 10 major percentage losses or Bear markets (as some people call it). The fastest fall being the 29.6% fall in 1998 that took 30 days. The Federal Reserve had to cut down interest rates due to fears that recession might hit globally. This helped IN reversing the stock market downward slide.
However, the NASDAQ was able to get back up almost immediately after. Here are the top percentage losses or Bear Markets in the NASDAQ since 1971.
- On the 19th of October 1987, stocks fell 11.35%. The day after, the fell by 9.00%.
- On 26th October 1987, there was a 9.01% loss.
- Sales were smooth until April 3, 2000 when another percentage loss was recorded – 7.64%. 11 days later there was another major drop of 9.67%.
- In 2001, there was another percentage loss of 7.23% on the 2nd day of January.
- In 2008, there was a 9.14% loss on 29th September; an 8.47% loss on October 15th; and the most recent – an 8.95% loss on the very first day of December.
Nobody really understood what led to the unprecedented percentage loss in the most recent bear market. This is because technology stocks were doubling, and the Federal Reserve had already raised short term interest rates. But still, shares that once peaked were falling. This even made a lot investors who were willing to pump in huge amounts of money into technology stocks were beginning to have a rethink. Those who could withdraw the monies they had put in, took as much as they could and fled – including those who bought shares when the prices were fast rising.
Some Causes of this Percentage Loss
The fact that traders who made large gains on the NASDAQ would have to also pay a huge amount of money as income tax, could have contributed to the decline or percentage loss. How stocks in the NASDAQ will fare may somewhat depend on if investors are willing to take the risk of putting money on stocks that have been projected to yield high dividends in many years to come. Since the NASDAQ is an electronic platform, it’s expected that the “new economy” stocks will prosper since you can purchase from any part of the world.
Since the beginning of the “dot com” era, smaller companies have caught the attention of many investors – regardless of their operating history or financial pedigree. While companies with large market capitalisation were noticed to either decline or gain little profits.
There are times when the NASDAQ composite dropped a lot of points due to worries about major economies around the world and rumours about interest rate hikes from the Federal Reserve Bank. For instance, when there’s a worry about the economy of China, the UK, the US, Germany and some other developed countries, it has a way of affecting the trading through out that period.
After the September 11, 2001 attacks in the US by terrorists there was a drop in the percentage or points for the NASDAQ. This was because some investors were panicking.
Keep in mind that worse days on the NASDAQ doesn’t mean that the stocks won’t do well anymore after then. But investing in stocks from the times when the exchange market was still growing was likely to put the at more risk. Now, traders know how and when to transact on the platform. When China’s economy started to struggle, it affected commodities that consumers needed. The Federal Reserve were also not making it easy due to the much anticipated increase in interest rates.
Companies trading on the NASDAQ do all they can go make sales in this electronic platform that allows investors buy and sell from anywhere in the world they are in.. But every business is a risk, so investing in stocks means you are taking a risk that will bring you profit. Therefore, when the worst days hit the NASDAQ, it’s never the end of the world. It’s also adviced that you invest in a variety of stocks. Diversification has a way of making you earn even when there’s a decline in the value of a particular company’s share. So when the mega caps lose value, the small caps can be gaining in value and further boost your account.