Market Downturn: A Blast from the Past?
The Nasdaq Composite closed down more than 1% on the two first trading days of 2024 for the first time since 2005, according to Bespoke Investment Group.
Many of 2023’s leaders, including the “Magnificent Seven” mega-cap tech stocks — Alphabet (Google), Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla — have sold off as investors appear to be taking gains after last year’s rally.
Is the start-of-the-year sell-off just a healthy pullback or a sign of things to come for the entire year?
Let’s dive into the data.
Historical Precedents and Projections
The Nasdaq had only opened the year down more than 1% on the first two trading days twice before this week: 1980 and 2005. In both of those years, the tech-heavy index ended the year higher, although 2005 was relatively flat. But in 1980, despite the sluggish start, the Nasdaq Composite closed the year up nearly 34% according to Nasdaq.
Bespoke also points out that many of the leaders of 2023 are the names experiencing pullbacks to start the year. Apple Inc (NASDAQ:AAPL) is down nearly 3% since the start of the year, while other mega-cap tech stocks such as Microsoft Corp (NASDAQ:MSFT) and NVIDIA Corp (NASDAQ:NVDA) have also stumbled out of the gates.
Expert Insights
January is typically just an average month for stocks, ranking as the sixth-best month for S&P 500 returns since 1950, according to Carson Group’s Ryan Detrick.
Detrick also pointed out that mild pullbacks, like the one we’ve seen in the S&P 500 to start the year, typically happen multiple times a year, so it may not be something to worry about — at least not yet.
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