Hey [Name],
Between 1995 and 1999, The Nasdaq 100 doubled every 2 years.
If you think that sounds crazy, check this out:
Since late 2022, we’ve seen the exact same thing – a 100% return that’s doubled tech stock prices.
In fact, if you overlay the price action from the late 1990s onto the last 2 years, they match almost perfectly.
The big question is: could we see the same kind of extended melt-up that drove the 1990s boom?
The AI Revolution: Today’s Internet Boom?
Just like the internet revolutionized everything in the 1990s, artificial intelligence is today’s game-changer.
Here’s what’s fascinating: the NASDAQ 100 is trading at the same valuation levels we saw in October 1998.
Back then, that wasn’t the end – the index soared another 234% before finally peaking.
Looking at PE ratios, tech stocks are sitting around 30 – levels we’ve only seen during the dot-com mania.
The gap between tech and the broader market S&P 500 is widening, similar to the late 1990s pattern.
But here’s the thing – during the dot-com era, this gap grew way bigger than what we’re seeing today.
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Market Psychology: When Stories Drive Prices
It can be dangerous when the market begins to get too complacent like this though.
Prices can diverge from fundamentals in what’s call a ‘Bubble’, which are fueled by viral narratives, like the internet or AI.
Today, Wall Street analysts are still very optimistic on long-term tech.
This chart shows how high the earnings expectations of Wall Street analysts are on technology stocks looking out 5 years.
They’re forecasting 25% annual earnings growth for the next 5 years – almost matching the 30% projections we saw in the late 1990s.
These are massive expectations and, in our view, they’re unlikely to materialize.
So yes, tech may be disconnecting from fundamentals today.
But as George Soros famously said: “When I see a bubble forming, I rush in to buy, adding fuel to the fire.”
If you can’t fight it, join it!
Tech’s Incredible Long-Term Performance
Since its inception, the NASDAQ 100 has beaten the S&P 500 by 400%.
Even since 2002, tech has outperformed by 230%.
That said, recently, we’ve seen something interesting.
After surging on initial AI enthusiasm in early 2023, tech’s performance relative to the S&P 500 has stabilized since June 2023.
To some, this stagnation signals a topping process, indicating that tech stocks are ready to significantly underperform the S&P 500.
But to others, this is the tech sector setting up a base to move up higher relative to the S&P 500 and continue its euphoric performance.
A similar thing happened in 1999:
After a huge run in late-1998, tech consolidated for almost a year before resuming its uptrend into 2000.
What Technical Analysis Tells Us
We’ve been neutral on tech since 2023, but recent moves do suggest that tech may be gearing up to outperform again:
- Moving averages have tightened into a cluster
- A solid base has formed
- We’ve just seen a bullish breakout
This technical strength has made us bullish on tech stocks.
Our Amazon position is already up 15%, and we’re actively scanning for new opportunities.
But we’re also staying flexible to our approach.
If the chart of tech relative to the S&P 500 falls back below key moving averages, it’ll be a red flag.
Flexibility is the cornerstone of our strategy at Bravos Research.
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- Average loss in 2024 = 3.52%
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Read more: This Time is NOT Different
